SOUTHERN UNION CO, PRE 14A, 1994-03-02

SOUTHERN UNION CO
PRE 14A, 1994-03-02
NATURAL GAS DISTRIBUTION

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Southern Union Company
_______________________________________________________________________________
(Name of Registrant as Specified In Its Charter)

Southern Union Company
________________________________________________________________________________

(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).

[ ] 500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:
___________________________________________________________________________

2) Aggregate number of securities to which transaction applies:

___________________________________________________________________________

3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

___________________________________________________________________________

4) Proposed maximum aggregate value of transaction:

___________________________________________________________________________

Set forth the amount on which the filing fee is calculated and state how it
was determined.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing fee for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

<PAGE>

SOUTHERN UNION COMPANY
504 LAVACA STREET, EIGHTH FLOOR
AUSTIN, TEXAS 78701

April ____, 1994

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
Southern Union Company to be held at ________ p.m. (Central Daylight Savings
Time) on Wednesday, May ____, 1994 in the third floor board room of the Texas
Commerce Bank Building, 700 Lavaca Street, Austin, Texas. We look forward to
greeting personally those stockholders who are able to attend.

The accompanying Notice of Meeting and Proxy Statement describe the matters
to come before the meeting. SUCH MATTERS INCLUDE AMENDMENTS TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS THAT REQUIRE THE APPROVAL OF
80% OF THE OUTSTANDING SHARES OF COMMON STOCK. ACCORDINGLY, YOUR PRESENCE IN
PERSON OR BY PROXY IS EXTREMELY IMPORTANT.

Whether or not you plan to attend the meeting on May _______, 1994 please
mark, sign and date the enclosed proxy and return it in the envelope provided
(which requires no postage if mailed in the United States). Your prompt
cooperation will be appreciated.

On behalf of the Board of Directors,

Sincerely,

GEORGE L. LINDEMANN
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER

<PAGE>

SOUTHERN UNION COMPANY
504 LAVACA STREET, EIGHTH FLOOR
AUSTIN, TEXAS 78701

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY _____, 1994

To the Holders of Common Stock of
SOUTHERN UNION COMPANY:

NOTICE IS HEREBY GIVEN that the 1994 Annual Meeting of Stockholders (the
"Meeting") of Southern Union Company, a Delaware corporation (the "Company"),
will be held in the third floor board room of the Texas Commerce Bank Building,
700 Lavaca Street, Austin, Texas, on Wednesday, May _____,1994 at ______ p.m.
(Central Daylight Savings Time), for the purpose of considering and acting upon:
(i) the election of three persons to serve as the Class I directors until the
1997 Annual Meeting of Stockholders or until their successors are duly elected
and qualified; (ii) the approval of the proposal to increase the maximum size of
the Board to thirteen directors; (iii) the approval of the proposal to amend the
Restated Certificate of Incorporation and Bylaws to eliminate Article Twelfth
and other 80% supermajority voting provisions contained therein; (iv) the
adoption of the Southern Union Supplemental Deferred Compensation Plan; (v) the
adoption of the Southern Union Directors' Deferred Compensation Plan; and (vi)
such other business as may properly come before the Meeting or any adjournment
or postponement thereof. The Board of Directors is not aware of any other
business to come before the Meeting.

The Board of Directors has fixed [March 31, 1994], as the record date (the
"Record Date") for the determination of stockholders entitled to notice of, and
to vote at, the Meeting and any adjournment or postponement thereof. Only
holders of record of the Company's common stock, par value $1.00 per share
("Common Stock"), at the close of business on the Record Date are entitled to
vote on all matters coming before the Meeting or any adjournment or postponement
thereof. A complete list of stockholders entitled to vote at the Meeting will
be maintained in the Company's offices at 504 Lavaca Street, Eighth Floor,
Austin, Texas 78701, for ten days prior to the Meeting.

Your vote is important. Whether or not you plan to attend the Meeting in
person, please mark, execute, date and return the enclosed proxy in the envelope
provided (which requires no postage if mailed within the United States).
Should you attend the Meeting in person you may, if you wish, withdraw your
proxy and vote your shares in person.

By Order of the Board of Directors,

DENNIS K. MORGAN
SECRETARY
Austin, Texas
April , 1994

<PAGE>

SOUTHERN UNION COMPANY
504 LAVACA STREET, EIGHTH FLOOR
AUSTIN, TEXAS 78701
____________________

PROXY STATEMENT
____________________

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY , 1994

The accompanying proxy, first mailed to stockholders together with the
Notice of Annual Meeting and this Proxy Statement on or about April _____, 1994,
is solicited by Southern Union Company (the "Company") in connection with the
Annual Meeting of Stockholders (the "Meeting") to be held on May ______,1994.
The proxy may be revoked by a stockholder at any time prior to its exercise by
executing and returning a proxy bearing a later date, by giving written notice
of revocation to the Secretary of the Company or by attending the Meeting and
voting in person.

All properly executed, unrevoked proxies received before the Meeting will
be voted in accordance with the directions of the stockholders. When no
direction has been given by a stockholder returning a proxy, the proxy will be
voted FOR ALL NOMINEES named in this proxy statement for election as directors
and FOR all other proposals presented in this proxy statement. Proxies should
NOT be sent by stockholders to the Company but to Continental Stock Transfer &
Trust Company, the Company's Registrar and Transfer Agent, at 2 Broadway, 19th
floor, New York, New York 10004.

VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF

[March 31, 1994], has been set as the record date (the "Record Date") for
determination of stockholders entitled to notice of and to vote at the Meeting.
Holders of the Company's common stock, $1.00 par value (the "Common Stock"), at
the close of business on the Record Date will be entitled to one vote per share
on all proper business brought before the Meeting. With respect to the election
of directors, holders of Common Stock have cumulative voting rights, which
entitle each stockholder to that number of votes which equals the number of
shares held multiplied by the number of directors to be elected. The Bylaws of
the Company provide that any stockholder who intends to so cumulate votes must
give written notice to the Secretary of the Company no later than ten (10) days
after the date on which notice of the Meeting was first sent to stockholders.

<PAGE>

On the Record Date, there were outstanding and entitled to vote _________
shares of Common Stock. The presence, in person or by proxy, of a majority of
the outstanding shares of Common Stock entitled to vote at the Meeting will
constitute a quorum.

The following table shows as of the Record Date, unless otherwise
indicated, the number of all shares of the Company's Common Stock beneficially
held by each director, by each executive officer named in the management
compensation tables (see "Management Compensation"), by each person known by the
Company to beneficially own 5% or more of the Company's outstanding Common
Stock, and by all directors and executive officers as a group. Except as
otherwise indicated, each owner has sole voting and investment power over his
shares.

NUMBER OF
NAME OF BENEFICIAL OWNER SHARES HELD PERCENT OF CLASS
- ------------------------ ----------- ----------------
<S> <C> <C>
George L. Lindemann 1,468,462(1) 13.50%

Adam M. Lindemann 913,860(2) 8.40%

George Lindemann, Jr. 913,860(2) 8.40%
11802 Wimbledon Circle
Wellington, Florida 33414

Sloan N. Lindemann 913,860(2) 8.40%
800 Fifth Avenue
New York, New York 10022

John E. Brennan 134,485(3) 1.24%

Frank W. Denius 8,137(4) *

Aaron I. Fleischman 132,903(5) 1.22%

Peter H. Kelley 65,310(6) *

Roger J. Pearson 8,137(7) *

George Rountree, III 17,220(8) *

Dan K. Wassong 6,372 *

Eugene N. Dubay 37,145(9) *

Ronald J. Endres 38,084(10) *

</TABLE>

-2-

<PAGE>

<S> <C> <C>
Dennis K. Morgan 2,292(11) *

Lee M. Bass 575,437(12)(13) 5.28%
201 Main Street
Fort Worth, Texas 76102

Sid R. Bass Management Trust(14) 575,437(12)(15) 5.28%
201 Main Street
Fort Worth, Texas 76102

Snyder Capital Management, Inc. 606,261(16) 5.57%
350 California Street
Suite 1460
San Francisco, California 94104

All Directors and Executive Officers
as a group (17 in group) 2,838,843(17) 26.53%

<FN>
_______________

(1) Of these shares: 607,990 are owned by Mr. Lindemann; 804,972 shares are
owned by his wife, Dr. F.B. Lindemann; and, 55,500 shares represent shares
of Common Stock Mr. Lindemann is entitled to purchase upon the exercise of
presently exercisable stock options pursuant to the Company's 1982 Stock
Option Plan and the 1992 Long Term Stock Incentive Plan (the "1992 Plan").
Such number excludes: shares owned by each of Mr. and Mrs. Lindemann's
three children for which they disclaim beneficial ownership (see Adam M.,
George, Jr. and Sloan N. Lindemann elsewhere in the table); and, options to
acquire shares of Common Stock that are not exercisable within sixty days
of the date hereof. See "Management Compensation - Stock Options". A
total of 1,367,392 shares held by Mr. and Mrs. Lindemann and their three
children have been pledged to Activated Communications Limited Partnership
("Activated"). Activated, which is owned and managed by, or for the
benefit of, the Lindemanns provided the funds used to purchase these
shares.

(2) This information, including the numbers of shares set forth in the table,
was obtained from and is reported herein in reliance upon a Schedule 13D
(as amended through January 11, 1994) filed by Adam M. Lindemann, Dr. F.B.
Lindemann, George L. Lindemann, George Lindemann, Jr. and Sloan N.
Lindemann. Except as described in Note (1), each member of the Lindemann
family disclaims beneficial ownership of any shares owned by any other
member of the Lindemann family. Accordingly, except as described in Note
(1), the numbers of shares set forth in the table reflect only such
individual's direct ownership.

(3) Of these shares, 1,674 shares are owned by his wife, 74,520 are held in two
separate trusts for the benefit of members of his family and 37,500
represent shares that Mr. Brennan is entitled to purchase upon the exercise
of presently exercisable stock options granted to him pursuant to the
Company's 1982 Stock Option Plan and the 1992 Plan. Such number excludes
options to acquire shares of Common Stock that are not exercisable within
sixty days of the date hereof. See "Management Compensation - Stock
Options."

(4) Includes approximately 153 shares allocated to Mr. Denius pursuant to the
Directors' Deferred Compensation Plan.

(5) Includes: 37,500 shares that Fleischman and Walsh, in which Mr. Fleischman
is the Senior Partner, is entitled to purchase upon exercise of a warrant;
approximately 286 vested shares allocated to Mr. Fleischman pursuant to the
Directors' Deferred Compensation Plan; and 37,438 shares owned by the
Fleischman and Walsh 401(k) Profit Sharing Plan ("F&W Plan") of which Mr.
Fleischman is a trustee and a beneficiary. Mr. Fleischman disclaims
beneficial ownership of those shares held by the F&W Plan in which he does
not have a pecuniary interest.

</TABLE>

-3-

<PAGE>

<FN>

(6) Includes 37,000 shares that Mr. Kelley is entitled to purchase upon the
exercise of presently exercisable stock options granted pursuant to the
Company's 1982 Stock Option Plan and the 1992 Plan. Such number excludes
options to acquire shares of Common Stock that are not exercisable within
sixty days of the date hereof. See "Management Compensation - Stock
Options." Such number also includes: approximately 2,143 vested shares
held by the Southern Union Savings (401(k)) Plan; 152 vested shares held by
the Southern Union Stock Purchase Plan; and 121 vested shares held by the
Southern Union Supplemental Savings Plan.

(7) Includes 6,417 shares owned jointly by Mr. Pearson and his father.

(8) Includes: 517 shares owned by his wife; and approximately 286 vested shares
allocated to Mr. Rountree pursuant to the Directors' Deferred Compensation
Plan.

(9) Includes 36,000 shares Mr. Dubay is entitled to purchase upon the exercise
of presently exercisable stock options pursuant to the Company's 1982 Stock
Option Plan and the 1992 Plan. Such number excludes options to acquire
shares of Common Stock that are not exercisable within sixty days of the
date hereof. See "Management Compensation - Stock Options." Such number
also includes: approximately 522 vested shares held by the Southern Union
Savings (401(k)) Plan; and 623 vested shares held by the Southern Union
Supplemental Deferred Compensation Plan.

(10) Includes 36,000 shares Mr. Endres is entitled to purchase upon the exercise
of presently exercisable stock options pursuant to the Company's 1982 Stock
Option Plan and the 1992 Plan. Such number excludes options to acquire
shares of Common Stock that are not exercisable within sixty days of the
date hereof. See "Management Compensation - Stock Options." Such number
also includes: approximately 1,461 vested shares held by the Southern Union
Savings (401(k)) Plan; and 623 vested shares held by the Southern Union
Supplemental Deferred Compensation Plan.

(11) Includes 1,500 shares Mr. Morgan is entitled to purchase upon the exercise
of presently exercisable stock options pursuant to the Company's 1992 Plan.
Such number excludes options to acquire shares of Common Stock that are not
exercisable within sixty days of the date hereof. See "Management
Compensation - Stock Options." Such number also includes: approximately
603 vested shares held by the Southern Union Savings (401(k)) Plan; and
approximately 189 vested shares held by the Southern Union Supplemental
Deferred Compensation Plan.

(12) Does not include 49,500 (representing less than 1% of the Common Stock
outstanding) owned by BEPCO International, Inc., which is owned in equal
parts by Lee M. Bass, Sid R. Bass and two other persons. Neither Lee M.
Bass nor Sid R. Bass is a director or officer of BEPCO International, Inc.
This information, the information set forth in note (14) and the number of
shares owned by Lee M. Bass and Sid R. Bass Management Trust set forth in
the table, were obtained from and are reported herein in reliance upon a
Schedule 13D filed by Sid R. Bass, Lee M. Bass, Sid R. Bass Management
Trust and BEPCO International, Inc.

(13) Does not include shares reported to be held by Sid R. Bass Management
Trust. See notes (12), (14) and (15).

(14) Sid R. Bass Management Trust is a Revocable Trust under Texas law for which
Sid R. Bass, Lee M. Bass and one other person are trustees.

(15) Does not include shares reported to be held by Lee M. Bass. See Notes (12)
and (13).

(16) This information was obtained from and is reported herein in reliance upon
a Schedule 13G dated February 10, 1994 filed by Snyder Capital Management,
Inc.

(17) Excludes options granted pursuant to the Company's 1982 Stock Option Plan
and the 1992 Plan to acquire shares of Common Stock that are not presently
exercisable or do not become exercisable within sixty days of the date
hereof. Includes approximately 8,968 vested shares held by certain benefit
and deferred savings plans for which certain executive officers and
directors may be deemed beneficial owners, but excludes 233 shares which
have not vested under the terms of such plans.

* Indicates less than one percent (1%).

</TABLE>

-4-

<PAGE>

ELECTION OF DIRECTORS

The Board of Directors of the Company is divided into three classes, each
of which serves a staggered three-year term of office. The terms of office of
the Class I directors expire at this Annual Meeting of Stockholders. The Class
II directors will serve until the 1995 Annual Meeting of Stockholders, and the
Class III directors will serve until the 1996 Annual Meeting of Stockholders.
John E. Brennan, Frank W. Denius and Roger J. Pearson (the "Nominees") are the
Class I directors standing for election to a three-year term of office expiring
at the 1997 Annual Meeting of Stockholders or when their successors are duly
elected and qualified.

The Company is informed that each of the Nominees is willing, if elected,
to continue to serve as a director; however, if any of them should decline or
become unable to serve as a director for any reason, votes will be cast instead
for a substitute nominee designated by the Board of Directors or, if none is so
designated, will be cast according to the judgment of the person or persons
voting the proxy. If cumulative voting is in effect at the Meeting, unless
authority is withheld, the persons named in the enclosed proxy will allocate the
votes represented by such proxy in the manner they deem proper in their best
judgment.

Pursuant to the Company's Bylaws, any stockholder entitled to vote at a
meeting called for the election of directors may nominate candidates for
election as directors if written notice is delivered to the Company's Secretary
at least 45 days before an annual meeting or no later than ten days after the
date of the notice of a special meeting. Accordingly, no stockholder may make
additional nominations at the Annual Meeting. The notice must include certain
information about the nominating stockholder and the nominees. Certain persons
are also disqualified from serving as directors. A copy of the relevant Bylaw
provisions may be obtained from the Company's Secretary. As of the date hereof,
no stockholder has nominated any person to serve as a director of the Company.

Information as to the directors of the Company (including the Nominees) as
of March 31, 1994 is provided below:

NOMINEES

CLASS I - TERM EXPIRES IN 1997

JOHN E. BRENNAN has been Vice Chairman of the Board of the Company since
February 1990. Mr. Brennan devotes only a small part of his business time to
the business of the Company. Prior to April 1992, Mr. Brennan had been
President and Chief Operating Officer of Metro Mobile CTS, Inc. ("Metro
Mobile"). Age: 47.

FRANK W. DENIUS has been a director of the Company since 1976 and
previously served as a director of the Company from 1955 to 1975. Since
February 1990, Mr. Denius has been Chairman Emeritus of the Company. Mr. Denius
was Chairman of the Board and President of the Company from 1986 until February
1990 and Chief Executive Officer from 1985 until February 1990. Since February
1990, Mr. Denius has been engaged in the private practice of law in Austin,
Texas. Mr. Denius is also a director of Telecom Corp. Age: 69.

-5-

<PAGE>

ROGER J. PEARSON is an attorney in private practice in Stamford,
Connecticut where he is of counsel in the firm of Weber, Neville & Shaver. Mr.
Pearson was First-Selectman (Mayor) of Greenwich, Connecticut from 1983 to 1985.
Mr. Pearson has been a Director of the Company since January 1992. Age: 48.

DIRECTORS CONTINUING IN OFFICE
Class II - Term expires in 1995

AARON I. FLEISCHMAN is Senior Partner of Fleischman and Walsh, a
Washington, D.C. law firm specializing in regulatory, corporate-securities and
litigation matters for telecommunications and regulated utility companies. Mr.
Fleischman is also a director of Citizens Utilities Company. Age: 55.

ADAM M. LINDEMANN has been primarily engaged in private investments since
April 1992. Prior to April 1992, he had been Vice President - Corporate
Development of Metro Mobile and President of Vision Energy Resources, Inc., a
wholly owned subsidiary of Metro Mobile primarily engaged in the distribution of
propane. Director Lindemann is the son of George L. Lindemann, Chairman of the
Board and Chief Executive Officer of the Company. Age: 32.

GEORGE ROUNTREE, III is an attorney in private practice in Wilmington,
North Carolina, where he has been a senior partner in the firm of Rountree &
Seagle since its formation in 1977. Age: 60.

CLASS III - NEW TERM EXPIRES IN 1996

GEORGE L. LINDEMANN has been Chairman of the Board and Chief Executive
Officer of the Company since February 1990. He has been Chairman of the
Executive Committee of the Company's Board of Directors since March 1990. Mr.
Lindemann does not devote his full business time to the business of the Company.
He was Chairman of the Board and Chief Executive Officer of Metro Mobile from
its formation in 1983 until April 1992. He has been President and a director of
Cellular Dynamics, Inc., the managing general partner of Activated
Communications Limited Partnership, since May 1982. Age: 58.

PETER H. KELLEY has been President and Chief Operating Officer of the
Company since February 1990, President and Chief Operating Officer of Southern
Union Gas Company ("Southern Union Gas"), a division of the Company, since
October 1990 and President of Missouri Gas Energy ("MGE") since December 1993.
Prior to joining the Company, he was Vice President of Operations from February
1988 until February 1990, Vice President of Sales from December 1986 until
February 1988 and Director of Sales and Service from May 1986 until December
1986 of Metro Mobile. Age: 47.

DAN K. WASSONG has been the President, Chief Executive Officer and a
director of Del Laboratories, Inc., a manufacturer of cosmetics, toiletries and
pharmaceuticals, for more than the past five years. Age: 63.

With the exception of Messrs. Denius and Pearson as described above, each
of the above-named directors and Nominees first became a director of the Company
on February 6, 1990.

-6-

<PAGE>

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The Executive Officers of the Company are elected annually by and serve at
the pleasure of the Board for one year or until their successors are elected and
qualified. The following Executive Officers of the Company are not directors.

EUGENE N. DUBAY was named Executive Vice President and Chief Operating
Officer of MGE in December 1993, and prior to that served as Senior Vice
President - Mergers and Acquisitions, Chief Information Officer and Assistant
Secretary of the Company since March 1990. Previously, Mr. Dubay held other
positions with the Company, primarily of a financial nature, from October 1981
to January 1989. After leaving the Company in January 1989, from February 1989
through August 1989 he was an advisor to the audit department of Atlantic
Richfield Company. Mr. Dubay rejoined the Company in August 1989 as Vice
President - Internal Audit, which position he held until March 1990. He was
the Secretary of the Company from February 1990 until August 1990. Age: 45.

RONALD J. ENDRES has been Senior Vice President - Finance and
Administration, and Chief Financial Officer since October 1990. He has been the
Chief Financial Officer since October 1989 and a Senior Vice President since
April 1987. Previously, Mr. Endres held other financial and operating positions
with the Company from June 1969 to October 1990. Mr. Endres was President of
Southern Union Gas from January 1986 until October 1990. Age: 49.

DAVID J. KVAPIL has been Vice President - Controller since July 1993 and
Controller since August 1992. Prior to joining the Company, Mr. Kvapil was a
Senior Audit Manager with Coopers & Lybrand. Age: 39.

DENNIS K. MORGAN has been Vice President - Legal and the Secretary of the
Company since April 1991 and a Vice President of the Company since January 1991.
From January 1990 until January 1991, he was Vice President and General Attorney
of Southern Union Exploration Company ("SX"), a former subsidiary of the
Company, and from June 1981 until January 1990, he held various other legal
positions with SX. Age: 46.

DONALD A. SCOVIL became Senior Vice President - Planning in October 1990.
He was previously Vice President - Controller of Southern Union Gas from 1984
until October 1990. Previously, Mr. Scovil held other financial positions with
the Company from November 1978 to 1984. Age: 44.

-7-

<PAGE>

COMMITTEES AND MEETINGS
OF THE BOARD OF DIRECTORS

The Board of Directors has an Executive Committee, composed of Messrs. G.
Lindemann (Chairman), Brennan and Kelley. During the intervals between meetings
of the Board of Directors, this committee has the authority to, and may exercise
all of the powers of, the Board of Directors in the management of the business,
property and affairs of the Company as respects all matters which are not by
statute or by the Company's Restated Certificate of Incorporation, as amended,
or its Bylaws required to be acted upon by the Board of Directors. This
committee must exercise such authority in such manner as it deems to be in the
best interests of the Company and consistent with any specific directions of the
Board of Directors.

The Board of Directors has an Audit Committee, currently composed of
Messrs. Pearson (Chairman) and Rountree. The Audit Committee met three times
during fiscal year 1993. This committee has the duties of recommending to the
Board of Directors the appointment of independent auditors, reviewing their
charges for services, reviewing the scope and results of the audits performed,
reviewing the adequacy and operation of the Company's internal audit department,
and performing such other duties or functions with respect to the Company's
accounting, financial and operating controls as deemed appropriate by it or the
Board of Directors.

The Board of Directors has a Long-Term Stock Incentive Plan Committee
currently composed of Messrs. Denius (Chairman) and Fleischman. This committee
has authority to make all decisions regarding: (i) the granting of awards under
the 1992 Long-Term Plan; (ii) eligibility of employees to receive awards; and
(iii) interpretation of the 1992 Long-Term Plan. The Plan Committee consists of
no fewer than two directors, neither of whom have received any awards during the
prior year, nor are currently eligible to receive any awards.

The Board of Directors held three meetings and acted by unanimous written
consent on seven occasions during fiscal year 1993. Except for Mr. Adam
Lindemann who was unable to attend one meeting of the Board of Directors, all
directors attended all of the meetings of the Board and committees on which they
served that were held in 1993 while they were directors and a member of any such
committee. Compensation for each director is $20,000 per year, payable in
quarterly installments, except for: Mr. G. Lindemann (who receives $110,000 per
year as Chairman of the Board and Chief Executive Officer of the Company and
Chairman of the Executive Committee); Mr. Brennan (who receives $50,000 per year
as Vice Chairman of the Board of the Company and a member of the Executive
Committee); Mr. Kelley (who receives no compensation as a director in addition
to his compensation as a full-time officer and employee of the Company and its
subsidiaries); and the chairman and each other member of the Audit Committee of
the Company's Board of Directors, who receive $30,000 and $25,000 per year,
respectively. Members of the Board of Directors also are reimbursed for travel
expenses incurred to attend meetings of the Board of Directors and its
committees.

-8-

<PAGE>

MANAGEMENT COMPENSATION

The table below sets forth all compensation paid and awarded by the Company
and its subsidiaries for services rendered in the year ended December 31, 1993
to the Chief Executive Officer of the Company and each of the four most highly
compensated executive officers other than the Chief Executive Officer.

Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options/SARs (1) Compensation (2)
- --------------------------- ---- ------ ----- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
George L. Lindemann
Chairman of the Board and 1993 $110,024 -- -- --
Chief Executive Officer 1992 108,086 $ 55 64,500(5) --
1991 99,142 40 -- --

Peter H. Kelley
President and Chief 1993 261,520 70 -- $ 3,865(4)
Operating Officer 1992 244,861 13,805 37,500(5) 2,182(4)
1991 217,724 15,880 -- --

Eugene N. Dubay
Executive Vice President and 1993 163,248 9,568 -- 4,636(4)
Chief Operating Officer - 1992 145,787 4,401 22,500(5) 1,309(4)
Missouri Gas Energy 1991 128,257 45,727 -- --

Ronald J. Endres
Senior Vice President - 1993 177,732 1,920 -- 4,805(4)
Finance and Administration 1992 167,028 27,265 22,500(5) 2,182(4)
and Chief Financial Officer 1991 151,069 7,057 -- --

Dennis K. Morgan
Vice President - Legal 1993 105,303 1,043 -- 3,873(4)
and Secretary 1992 102,915 3,170 7,500(5) 1,589(4)
1991 88,350 15,150 -- --

<FN>
____________

(1) No Stock Appreciation Rights were granted in 1991, 1992 or 1993.

(2) Disclosure of All Other Compensation is not required for 1991.

(3) Includes 18,000 non-qualified stock options granted to Mr. Lindemann in
exchange for the cancellation of 18,000 incentive stock options. Such non-
qualified stock options have the same exercise price as the incentive stock
options being canceled.

(4) Company matching provided through the Southern Union Savings (401(k)) Plan
and the Supplemental Deferred Compensation Plan ("Supplemental Plan"). The
Board approved the adoption of the Supplemental Plan on June 1, 1993 and it
is subject to Shareholder approval at the 1994 Annual Meeting of
Stockholders.

(5) Securities underlying stock options have been adjusted to reflect the 50%
stock dividend payable March 9, 1994 to shareholders of record on February
23, 1994.

</TABLE>

-9-

<PAGE>

RETIREMENT BENEFITS

The following table reflects the combined benefits available for the
retirement plan and non-qualified plan.

PENSION PLAN TABLE
Years of Service
-------------------------------------------
Remuneration 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
125,000 40,784 54,378 54,378 54,924 64,078
150,000 50,159 66,878 66,878 66,924 78,078
175,000 59,534 79,378 79,378 79,378 92,078
200,000 68,909 91,878 91,878 91,878 105,233
225,000 78,284 104,378 104,378 104,378 105,233
250,000 87,659 105,233 105,233 105,233 105,233
300,000 105,233 105,233 105,233 105,233 105,233
400,000 105,233 105,233 105,233 105,233 105,233
450,000 105,233 105,233 105,233 105,233 105,233
500,000 105,233 105,233 105,233 105,233 105,233

</TABLE>

The Company has a Retirement Income Plan (the "Retirement Plan") for all
employees with benefits based upon average annual basic earnings for the five
highest consecutive years in the applicable period. Basic earnings, as defined
by the Retirement Plan, was redefined in December of 1989 to include W-2
earnings minus certain defined exclusions. Effective December 31, 1989, the
plan formula was modified to conform with the requirements of the Tax Reform Act
of 1986, as amended, and the plan no longer integrates with Social Security. In
order to retain the previous benefit levels for selected highly compensated
employees, a separate Non-Qualified Plan was established.

As of December 31, 1993, Messrs. Lindemann, Kelley, Dubay, Endres and
Morgan were credited with 3, 3, 12, 24 and 12 years of service, respectively.
Benefits are computed on the basis of a lifetime annuity with a ten year certain
payment period commencing at age 65. With respect to the nonqualified plan
benefits, certain offsets are included in the formula for estimated Social
Security benefits. Those offsets have been reflected in the amounts presented
in the table. Beginning in 1994, the maximum compensation considered in the
Qualified Plan will be $150,000 rather than the $235,840 limit applicable to
1993.

-10-

<PAGE>

The following table provides information regarding the exercise of stock
options by each of the named executive officers and the value of unexercised
"in-the-money" options as of December 31, 1993.

Number of Securities Underlying Value of In-The-Money Options
Unexercised Options at Fiscal at December 31, 1993
Year-End Exercisable/Unexercisable Exercisable/Unexercisable(2)
Shares Acquired Value ---------------------------------- ---------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George L. Lindemann * * 29,000(1) 46,000(1) $358,500 $541,500

Peter H. Kelley * * 29,000(1) 46,000(1) 388,500 574,000

Eugene N. Dubay * * 24,000(1) 26,000(1) 330,750 325,500

Ronald J. Endres * * 24,000(1) 26,000(1) 330,750 325,500

Dennis K. Morgan * * 1,000(1) 4,000(1) 10,500 42,000

<FN>

_____________

* No options were exercised during the year ended December 31, 1993 by the
named executive officer.

(1) The securities underlying unexercised options have not been adjusted to
reflect the 50% stock dividend payable March 9, 1994 to shareholders of
record on February 23, 1994.

(2) Based on a closing price on December 31, 1993 of $26.50 per share as
reported by the American Stock Exchange.

</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors of the Company does not have a separate compensation
committee. Except with respect to the Southern Union 1992 Long Term Stock
Incentive Plan which is administered by the Long Term Stock Incentive Plan
Committee, all decisions regarding management compensation are made by the full
Board of Directors of the Company. Directors John Brennan, George Lindemann and
Peter Kelley who are also executive officers of the Company, participated in
deliberations of the Board of Directors concerning management compensation.

Director Fleischman, a member of the Long Term Stock Incentive Plan
Committee, is Senior Partner of Fleischman and Walsh, which provides legal
services to the Company and certain of its subsidiaries. In 1993, the total
value of legal services provided by Fleischman and Walsh to the Company was
$1,109,685. Moreover, on February 10, 1994 the Company granted to Fleischman
and Walsh a warrant to purchase up to 25,000 Shares of Common Stock, $1 par
value per share, at an exercise price of $34.50. The warrant shall expire on
February 10, 2004.

-11-
<PAGE>

BOARD OF DIRECTORS REPORT ON
EXECUTIVE COMPENSATION

Since 1992, the Board of Directors have more closely aligned the total
compensation of the executive officers with the profitability of the Company.
Merit increases to the base salaries for the officer group have been moderate in
comparison to industry standards. The Southern Union 1992 Long Term Stock
Incentive Plan was introduced in order to focus the attention of management on
the long-term improvement of stockholder value.

The 1993 short-term incentive plan was aligned with the officer's and
manager's compensation to directly reflect the desired short-term marketing and
profitability goals of the Company. By balancing the use of short- and long-
term incentive and adequate base salary, the Board of Directors believes it will
be able to adequately recruit the talent needed to manage the Company, retain
the talents of the current management and align the successes of the Company and
management.

The factors and criteria utilized by the Board of Directors included the
assessment of comparable information from other utilities and similarly-sized
operations. The Long Term Stock Incentive Plan Committee reviewed all aspects
of compensation provided to the executive officers prior to determining the
proper levels of award to be given to each executive.

The Chairman of the Board and Chief Executive Officer, and President and
Chief Operating Officer were not included in the short-term incentive plan for
1993. The Senior Vice President - Mergers and Acquisitions and Chief
Information Officer; Senior Vice President - Finance and Administration, and
Chief Financial Officer; and Vice President - Legal and Secretary had the
ability to obtain short-term incentive awards for 1993.

In 1993, contingent on shareholder approval, the Board of Directors
established the Southern Union Supplemental Deferred Compensation Plan and the
Directors Deferred Compensation Plan. The intent of the Supplemental Deferred
Compensation Plan is to allow officers and selected highly compensated employees
a method of long-term saving which parallels the Company's 401(k) Plan. The
full extent of contributions to the 401(k) Savings Plan is unavailable to highly
compensated employees due to restrictions on contribution limits resulting from
discrimination testing. The Directors Deferred Compensation Plan allows a
deferral of income with a Company stock match which mirrors the matching
provisions provided by the Company's 401(k) Savings Plan.

In determining the compensation structure for the Chief Executive Officer
consideration was given to the fact that Mr. Lindemann does not devote his full
business time to the business of the Company. Accordingly, the Board of
Directors concentrated the bulk of Mr. Lindemann's compensation on long-term
incentives which are directly attributable to increasing stockholder value.

By: The Board of Directors

GEORGE L. LINDEMANN, CHAIRMAN JOHN E. BRENNAN, VICE CHAIRMAN
FRANK W. DENIUS, CHAIRMAN EMERITUS PETER H. KELLEY
AARON I. FLEISCHMAN ROGER J. PEARSON
ADAM M. LINDEMANN GEORGE ROUNTREE, III
DAN K. WASSONG

-12-
<PAGE>
COMPANY PERFORMANCE CHART

The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five years
ended December 31, 1993 with the cumulative total return on the S&P 500 Index
and an index of peer companies developed by the American Gas Association
("AGA"). The comparison assumes $100 was invested on December 31, 1988 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(SOUTHERN UNION, AGA PEER GROUP AND S&P 500)

<TABLE>
<CAPTION>
Southern AGA S&P
Union Peer Group Index
-------- ---------- -----
<S> <C> <C> <C>
1988 $100.00 $100.00 $100.00
1989 $164.83 $131.91 $131.59
1990 $ 85.40 $101.41 $127.49
1991 $ 97.20 $121.18 $166.17
1992 $ 94.06 $119.34 $178.81
1993 $168.03 $116.18 $196.75

</TABLE>

The AGA peer group index is comprised of member companies classified by
Edward D. Jones and Co. as gas distribution companies. Each component company
was included in the index in proportion to its market capitalization as
determined on the last trading day of the calendar year in each of the years
from 1988 to 1993.

-13-
<PAGE>

PROPOSAL TO INCREASE THE MAXIMUM SIZE OF
THE BOARD OF DIRECTORS TO THIRTEEN DIRECTORS

The Board has [unanimously] approved and recommends that the stockholders
of the Company approve an amendment to the Company's Restated Certificate of
Incorporation (the "Certificate") and Bylaws to increase the maximum size of the
Board of Directors to thirteen (13) persons. APPROVAL OF THIS PROPOSAL BY THE
HOLDERS OF 80% OF THE COMMON STOCK OUTSTANDING IS REQUIRED FOR PASSAGE.

The proposal would amend the second paragraph of Article Fourth of the
Certificate and Article II, Section 2, of the Bylaws. A copy of the Certificate
and certain provisions of the Bylaws as now in effect is attached as Appendix A.
A copy of the Certificate as proposed to be amended and restated and certain
provisions of the Bylaws as proposed to be amended is attached as Appendix B.

The Certificate and Bylaws presently authorize a Board of Directors of not
less than five (5) nor more than nine (9) persons divided into three classes
(which shall at all times be as nearly equal in number as possible). The exact
number of directors within these limits is to be determined from time to time by
resolutions adopted by the Board. The proposed amendment would continue to
provide for the determination of the exact size of the Board within the new
limits and the terms of directors currently in office would not change.

This amendment would give the Board the flexibility of adding four new
members and permit increased diversity, depth of experience and expertise in the
Board membership. As a result of recent acquisitions which have more than
doubled the size of the Company and the number of customers which it serves, the
Board believes that an increase in the size of the Board is particularly
appropriate at this time.

If the amendment is approved, the Board intends to appoint [names] to fill
the resulting vacancies for the terms indicated [biographies to come].

The Board and management have no other purposes than those described in
creating the additional directorships. The Board and management of the Company
have no knowledge of and do not anticipate any attempt to acquire control of the
Company, nor do they believe that the proposed increase in the size of the Board
would have a material effect in discouraging or preventing any such effort.

THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO INCREASE THE
MAXIMUM SIZE OF THE BOARD TO THIRTEEN DIRECTORS.

-14-
<PAGE>

PROPOSAL TO AMEND
THE RESTATED CERTIFICATE OF INCORPORATION
AND THE BYLAWS

The Board has [unanimously] approved and recommends that the stockholders
of the Company approve an amendment to the Certificate and Bylaws to (i)
eliminate Article Twelfth from the Certificate and to eliminate references
thereto in other sections of the Certificate and the Company's Bylaws and (ii)
to eliminate the 80% supermajority voting provisions contained in the
Certificate and the Bylaws. APPROVAL OF THIS PROPOSAL BY THE HOLDERS OF 80% OF
THE COMMON STOCK OUTSTANDING IS REQUIRED FOR PASSAGE.

A copy of the Certificate and the relevant provisions of the Bylaws as now
in effect is attached as Appendix A. A copy of the Certificate and the relevant
provisions of the Bylaws as proposed to be amended is attached as Appendix B.

GENERAL DESCRIPTION

The proposed amendment would eliminate Article Twelfth of the Certificate
in its entirety. Article Twelfth requires that certain Business Combinations,
which includes certain transactions with Interested Stockholders, be approved by
a majority of the Disinterested Directors. If such approval is not received,
then any such transaction must be approved by at least 80% of the outstanding
shares of all classes of voting stock (hereinafter, Common Stock, which is the
only voting stock presently authorized or outstanding) even if no shareholder
vote, or only a simple majority of outstanding shares or of those shareholders
voting, might otherwise be legally required.

It is important to understand that many of the terms defined in Article
Twelfth differ from similar concepts established under the Delaware General
Corporation Law (the "DGCL"). Article Twelfth provides the following specific
definitions:

An "Interested Stockholder" is any person or group (other than
the Company or a subsidiary) who is the beneficial owner of more than 10%
of the voting power of the voting stock. The term "beneficial owner"
includes persons directly and indirectly owning or having the right to
acquire or vote any shares of voting stock and groups of such persons
having agreements, arrangements or understandings for the purpose of
acquiring, holding, voting or disposing of any shares of voting stock.

A "Business Combination" includes the following transactions:
(a) a merger or consolidation of the Company or any subsidiary with an
Interested Stockholder or any other corporation (whether or not it is
itself an Interested Stockholder) that is, or after such merger or
consolidation would be, an "Affiliate" (as defined in Article Twelfth) of
such Interested Stockholder; (b) the sale or other disposition by the
Company or a subsidiary of assets having an aggregate "Fair Market Value"
(as defined in Article Twelfth) of $25,000,000 or more if an Interested
Stockholder or any such Affiliate of an Interested Stockholder is a party
to the transaction; (c) the issuance or transfer (in one or a series of
transactions) of any securities of the Company or of a subsidiary to an
Interested Stockholder or any Affiliate of an Interested Stockholder in
exchange for cash or

-15-

<PAGE>
property (including stock or other securities) having an aggregate fair
market value of $25,000,000 or more; (d) the adoption of any plan or
proposal for the liquidation or dissolution of the Company proposed by or
on behalf of an Interested Stockholder or any Affiliate of an Interested
Stockholder; or (e) any reclassification of securities, recapitalization,
merger with a subsidiary, or other transaction that has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding stock of any class of the Company or a subsidiary owned by an
Interested Stockholder or any Affiliate of an Interested Stockholder.

A "Disinterested Director" is any member of the Board who is not
affiliated with an Interested Stockholder and was a director of the Company
prior to the time the Interested Stockholder became an Interested Stock-
holder, and any successor to such Disinterested Director who is not
affiliated with an Interested Stockholder and was recommended by a majority
of the Disinterested Directors when on the Board.

The proposed amendment would also eliminate provisions in the Certificate
and the Bylaws that require the approval by holders of 80% of the outstanding
shares of Common Stock to amend, alter, repeal or adopt any provision of the
Certificate or the Bylaws that is inconsistent with the provisions (the
"supermajority provisions") of: (i) the second through fifth paragraphs of
Article Eighth of the Certificate and Article II, Sections 2 and 3 of the
Bylaws, which govern the election, removal, number and term of directorships;
(ii) Article Eleventh of the Certificate and Article I, Section 2 of the Bylaws,
which govern the calling of annual and special meetings of stockholders and
requires that all actions required or permitted to be taken by stockholders of
the Company be done at an annual or special meeting of stockholders and not
pursuant to a written consent in writing; (iii) Article Twelfth of the
Certificate, which is described above; and (iv) Article Thirteenth of the
Certificate and Article X, Section 8 of the Bylaws, which govern amendments to
the Certificate and Bylaws. If the supermajority requirements were eliminated,
changes to the Certificate and the size of the Board beyond what is currently
permitted by Article Eighth of the Certificate could be effected by the
affirmative vote of the holders of a majority of the voting stock, and changes
to the Bylaws could be effected by the affirmative vote of a majority of either
the outstanding shares of Common Stock or the members of the Board. The
proposed amendment would also have the effect of eliminating the requirement in
Article Eighth of the Certificate that holders of 80% of the outstanding shares
of Common Stock approve the removal of a director.

HISTORICAL BACKGROUND

Article Twelfth and the supermajority provisions are intended to make it
more difficult for a takeover to occur without the approval of the Board.
Article Twelfth and the supermajority voting provisions of the Certificate and
the Bylaws were adopted by the Company's stockholders in 1984 at a time when
hostile takeover attempts of companies were prevalent. In 1990, SU Acquisition,
Inc. merged into the Company (the "Merger"). The Merger resulted in new
shareholders, a new board of directors and new senior management, including
George L. Lindemann becoming the Chairman of the Board and Chief Executive
Officer of the Company, and he and members of his family becoming Interested
Stockholders. In connection with the Merger, the pre-Merger Board of the
Company terminated the then-existing stock purchase rights (poison pill) plan.

Frank W. Denius was the only director of the Company prior to the Merger
that remained a director following the Merger. Accordingly, Director Denius is
the only director who now meets, or can ever meet, the Article

-16-

<PAGE>
Twelfth definition of Disinterested Director. If Mr. Denius should cease to be
a director without first approving his successor or if he were ever unavailable
to act as a Disinterested Director, the Company would be unable to enter into
any transaction that would constitute a Business Combination without first
obtaining the approval of the holders of 80% of the outstanding shares of Common
Stock. The costs to the Company of such a shareholder vote would include actual
expenses for a meeting, the substantial time required to obtain such a vote and
the adverse effect the uncertainty of obtaining such approval might have on the
underlying transaction. For example, without Mr. Denius' approval, the Company
would not have been able, without a prior 80% stockholder vote of approval, to
enter into a Standby Purchase Agreement with Chairman Lindemann and members of
his family in connection with the Company's Common Stock subscription rights
offering in December 1993. The Lindemanns' role as standby purchasers assured
the successful sale of $50 million in Common Stock pursuant to the subscription
rights offering. Without the Standby Purchase Agreement, the Company likely
would have obtained an investment banking firm to serve as an underwriter, thus
incurring underwriting fees and discounts. Such additional expense would have
reduced the net proceeds to the Company, which would have required the sale of
additional shares for the Company to achieve the desired net proceeds.

REASONS FOR THE PROPOSAL

The Board believes that the provisions of Article Twelfth and the
supermajority provisions contained in the Certificate and Bylaws are no longer
meaningful, but have become unnecessary and potentially cumbersome. The Board
believes that elimination of Article Twelfth and the supermajority provisions
would provide greater flexibility in connection with the management of the
Company and transactions of the type subject to Article Twelfth and the
supermajority provisions, and that this flexibility would be beneficial to the
Company and its stockholders.

The Board believes that Article Twelfth is unnecessary because the Company
is subject to other safeguards that assure the fairness of transactions
involving interested directors or stockholders. Section 144 of the DGCL
requires that transactions with related parties, including Interested
Stockholders, either be: (i) approved by a majority of the disinterested
directors, as determined pursuant to the DGCL; (ii) approved by the holders of a
majority of the Common Stock entitled to vote thereon; or (iii) fair to the
Company as of the time such transactions were approved by the Board or the
holders of the Common Stock. It is the policy of the Company, and the terms of
the Company's outstanding senior notes and existing revolving credit facility
require, that any transaction with related parties (including Interested
Stockholders) be on terms no less favorable to the Company than could be
obtained in an arms-length transaction with unrelated parties. In approving any
such transaction, decisions by Board members are subject to the fiduciary duty
requirements of the DGCL and related case law.

Under the DGCL, approval of mergers, consolidations and similar
extraordinary sale transactions that are included in Business Combinations that
are subject to Article Twelfth generally would require the vote of the holders
of a majority of the outstanding shares of capital stock of the Company. Other
transactions currently covered by Article Twelfth may not require any
stockholder vote under the DGCL. In addition, Section 203 of the DGCL, which
became effective in 1987, restricts the ability of stockholders who beneficially
own 15% or more of the outstanding shares of the Company and have not held such
shares for at least three years from engaging in certain business combination
transactions involving the Company. Section 203 would not apply to Chairman
Lindemann

-17-
<PAGE>

or members of his family, since they have been the holders of more than 15% of
the outstanding Common Stock for more than three years.

The Board believes that the supermajority provisions are no longer
meaningful or necessary due to the current ownership structure of the Company,
and may actually hinder the Company's ability to raise capital or enter into
business combinations the Board believes are in the best interest of the
Company. Furthermore, the Board believes that the types of transactions subject
to Article Twelfth and the supermajority provisions should not be blocked by
holders of a small minority of 20% of the Common Stock outstanding.

As a gas utility, the Company also is subject to various federal, state and
local laws and regulations which may require the Company or a potential acquiror
to obtain certain approvals from federal, state or local regulatory authorities
for certain extraordinary events such as an acquisition of the Company. Such
approvals might be required from the Missouri Public Service Commission, local
franchise authorities in the Company's Texas service areas, the Texas Railroad
Commission the Federal Energy Regulatory Commission and the Securities and
Exchange Commission.

EFFECTS OF ADOPTION OF THE PROPOSAL

The elimination of Article Twelfth would permit the Company and any
Interested Stockholder to engage in transactions of the type restricted by
Article Twelfth with (i) approval of a majority of the Company's outstanding
Common Stock, as permitted by Sections 251 and 252 of the DGCL, or (ii) in the
case of certain issuances of securities to an Interested Stockholder, with the
approval of a majority of the disinterested directors as determined in
accordance with Section 144 of the DGCL. Elimination of Article Twelfth would
have the effect of rendering less difficult the accomplishment of business
combinations, changes in control of the Company, unsolicited tender offers or
mergers, and the assumption of control by the holder of a large block of shares
if a simple majority of the outstanding capital stock is in favor of such a
transaction.

The elimination of the supermajority provisions would make it easier for
current management to effect changes to the Certificate and Bylaws which they
favor, but would make it more difficult for the current management to preclude
such changes they opposed or to retain control if a hostile takeover was
attempted. However, it is unlikely that a hostile takeover attempt or other
shareholder initiatives would be successful unless supported by the Lindemann
family. Members of the Lindemann family, if they vote together as a block,
presently are able to vote approximately [39.5%] of the Common Stock
outstanding. The elimination of Article Twelfth and supermajority voting would
make it easier for the Lindemann family to obtain approval of a Business
Combination or other extraordinary items that they support, but could also make
it more difficult for them, or anyone else, to block or veto a Business
Combination or other extraordinary items that they oppose. Accordingly, the
Board believes there is no need to retain such supermajority voting provisions.

The Board recommends a vote FOR approval of the proposal to delete Article
Twelfth of the Certificate and to eliminate the supermajority voting provisions
contained in the Certificate and Bylaws.

-18-
<PAGE>

PROPOSAL TO APPROVE THE ADOPTION OF THE
SUPPLEMENTAL DEFERRED COMPENSATION PLAN

As of June 1, 1993, the Board approved the adoption of the Southern Union
Company Supplemental Deferred Compensation Plan (the "Supplemental Plan"). The
Supplemental Plan is designed to provide employee benefits similar to the
benefits such employee would have received under the Southern Union 401(k)
Savings Plan if not for the existence of certain limitations that are set forth
in the Internal Revenue Code of 1986, as amended (the "Code"), relating to
"highly compensated employees," as defined in the Code. Under the Supplemental
Plan, an eligible employee may, through payroll deductions, defer up to 5% of
his or her annual compensation (salary and bonus) (the "Employee
Contributions"). In addition, the Supplemental Plan requires the Company to
make a 50% matching contribution up to a maximum of 2% of the participant's
annual compensation. Such Employee Contributions, together with the Company's
matching contribution, are invested by the Supplemental Plan's trustee in shares
of Common Stock.

A participant is at all times 100% vested with respect to the amount of his
or her Employee Contributions and to the income, gains and losses with respect
to such contributions. The Company's matching contributions and any income,
gains and losses with respect to such matching contributions vest at a rate of
20% per year beginning with the date that the participant has completed two
years of service with the Company. A participant is fully vested with respect
to such amounts upon either completing six (6) years of service with the Company
or if the participant dies while employed by the Company. Employee
Contributions and the Company's matching contributions that are vested may not
be withdrawn by a participant until (i) thirty (30) days after such time the
participant is no longer an employee of the Company or (ii) with the permission
of the Long-Term Stock Incentive Plan Committee in the event of an unforeseeable
emergency arising from events beyond the control of the participant which
results in severe financial hardship.

The Supplemental Plan is operated under procedures set forth in the plan,
and is administered by the Board's Long-Term Stock Incentive Plan Committee.
The Board may terminate, suspend or amend the Supplemental Plan; provided that,
certain material amendments must be submitted for stockholder approval to the
extent necessary for the Supplemental Plan to satisfy the requirements of the
exemption from the short-swing profit rules under Section 16(b) of the
Securities Exchange Act of 1934, as amended.

The foregoing description is qualified in its entirety by the text of the
Supplemental Plan. A copy of the Supplemental Plan is available without charge
upon written request to the Secretary of the Company.

-19-
<PAGE>

SOUTHERN UNION COMPANY SUPPLEMENTAL DEFERRED COMPENSATION PLAN

The following table sets forth the dollar value of all Company matching
contributions as of December 31, 1993 and the number of shares contributed by
the Company as matching contributions for the year ended December 31, 1993.

- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF SHARES
- -------------------------------------------------------------------------------------
<S> <C> <C>
George L. Lindemann
Chairman of the Board and Chief 0 0
Executive Officer
- -------------------------------------------------------------------------------------
Peter H. Kelley
President and Chief Operating 1,477 50
Officer
- -------------------------------------------------------------------------------------
Ronald J. Endres
Senior Vice President - Finance and 1,030 35
Administration, and Chief Financial
Officer
- -------------------------------------------------------------------------------------
Eugene N. Dubay
Executive Vice President and 2,024 69
Chief Operating Officer -
Missouri Gas Energy
- -------------------------------------------------------------------------------------
Dennis K. Morgan
Vice President - Legal and Secretary 1,231 42
- -------------------------------------------------------------------------------------
All Executive Officers 6,758 231
- -------------------------------------------------------------------------------------
All Directors Who Are Not Executive 0** 0**
Officers
- -------------------------------------------------------------------------------------
All Employees Who Are Not Executive 10,061 343
Officers
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------

<FN>
_____________
* The number of shares have not been adjusted to reflect the 50% stock
dividend payable March 9, 1994 to shareholders of record on February
23, 1994.

** Only employees of the Company are eligible to participate.

The affirmative votes of a majority of the votes cast at the Meeting in
person or by proxy will be required to approve the Supplemental Plan.

The Board of Directors recommends that stockholders vote FOR the adoption
of the Southern Union Supplemental Deferred Compensation Plan.

</TABLE>

-20-

<PAGE>

PROPOSAL TO APPROVE THE ADOPTION OF THE
DIRECTORS' DEFERRED COMPENSATION PLAN

As of June 1, 1993, the Board approved the adoption of the Southern Union
Company Directors' Deferred Compensation Plan (the "Directors' Deferral Plan").
The Directors' Deferral Plan is designed to attract and retain well-qualified
individuals to serve as outside directors and to enhance the identity of their
interests and the interests of stockholders. Participation in the Directors'
Deferral Plan is optional and is subject to an irrevocable election to meet the
requirements under Section 16(b) of the Securities Exchange Act of 1934, as
amended.

Under the Directors' Deferral Plan, each director who is not also an
employee of the Company may choose to defer all or any percentage of his or her
director's fees and invest such deferred amount in Common Stock, provided that
an appropriate irrevocable written election to defer is made at least six months
prior to the beginning of the year to which such deferral applies. For the
six-month period beginning July 1, 1993, such irrevocable written election was
required to be made by June 30, 1993. In addition, the Directors' Deferral Plan
requires the Company to make a matching contribution of 50% of the first 7% of
the participant's total director's fees, to the extent deferred.

A participating director is 100% vested with respect to the amount of
director's fees that he elects to defer and any related income, gains and
losses. The Company's matching contributions do not vest until the
participating director either has completed five (5) years of service as a
director or dies while serving as a director. Deferred amounts may not be
withdrawn by a participant until (i) thirty (30) days after such time as the
director either retires or ceases to be a director of the Company or (ii) with
the permission of the Board in the event of an unforeseeable emergency arising
from events beyond the control of the participant which results in severe
financial hardship.

The Directors' Deferral Plan operates under procedures set forth in the
plan. No discretion regarding administration of the Directors' Deferral Plan is
vested in the Board or any officer or director of the Company. The Board may
terminate, suspend or amend the Directors' Deferral Plan; provided that, certain
material amendments must be submitted for stockholder approval to the extent
necessary for the Directors' Deferral Plan to satisfy the requirements of the
exemption from the short-swing profit rules under Section 16(b) of the
Securities Exchange Act of 1934, as amended.

The foregoing description of the Directors' Deferral Plan is qualified in
its entirety by the text of the Directors' Deferral Plan. A copy of the
Directors' Deferral Plan is available without charge upon written request to the
Secretary of the Company.

-21-

<PAGE>

SOUTHERN UNION COMPANY DIRECTORS' DEFERRED COMPENSATION PLAN

The following table sets forth the dollar value and the number of shares
contributed by the Company as matching contributions for the year ended
December 31, 1993.

- -----------------------------------------------------------------------------------------
<S> <C> <C>
George L. Lindemann
Chairman of the Board and Chief 0* 0*
Executive Officer
- -----------------------------------------------------------------------------------------
Peter H. Kelley 0* 0*
President and Chief Operating Officer
- -----------------------------------------------------------------------------------------
Ronald J. Endres
Senior Vice President - Finance and 0* 0*
Administration, and Chief Financial
Officer
- -----------------------------------------------------------------------------------------
Eugene N. Dubay
Executive Vice President and 0* 0*
Chief Operating Officer -
Missouri Gas Energy
- -----------------------------------------------------------------------------------------
Dennis K. Morgan
Vice President - Legal and Secretary 0* 0*
- -----------------------------------------------------------------------------------------
All Executive Officers 0* 0*
- -----------------------------------------------------------------------------------------
All Directors Who Are Not Executive 1,062 20
Officers
- -----------------------------------------------------------------------------------------
All Employees Who Are Not Executive 0* 0*
Officers
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------

<FN>
___________
* Only Directors who are not also employees of the Company are eligible
to participate. Directors Brennan, G. Lindemann and Kelley are
considered to be Executive Officers of the Company.

** The number of shares have not been adjusted to reflect the 50% stock
dividend payable March 9, 1994 to shareholders of record on February
23, 1994.

The affirmative votes of a majority of the votes cast at the Meeting in
person or by proxy will be required to approve the Directors' Deferred
Compensation Plan.

The Board of Directors recommends that stockholders vote FOR the adoption
of the Southern Union Directors' Deferred Compensation Plan.
</TABLE>

-22-

<PAGE>
CERTAIN RELATIONSHIPS

On April 1, 1992, the Company approved an advance (which was made on April
13, 1992) of $375,980 to Peter H. Kelley, President, Chief Operating Officer and
a Director of the Company, to enable him to repay certain funds borrowed by him
from Metro Mobile in connection with his departure from Metro Mobile to become
an executive officer of the Company. Such advance is evidenced by a note,
payable on demand, bearing an annual percentage interest rate equal to the prime
rate announced by Texas Commerce Bank National Association on the date the
advance was made, plus one-half percent (1/2%). As of December 31, 1993, Mr.
Kelley's outstanding principal and accrued but unpaid interest balance was
$355,428. This loan is being repaid on schedule.

On October 4, 1993, the Company's Board of Directors approved and ratified
payments by the Company to Activated Communications, Inc. ("Activated") for use
by the Company of Activated's office space in New York City. Activated is
controlled and operated by Company Chairman George L. Lindemann and Vice
Chairman John E. Brennan, who, along with Director Adam M. Lindemann, did not
participate in such Board action. Monthly rental reimbursements commenced
effective as of August 1992 for approximately half of Activated's base lease
payments before certain adjustments. Actual reimbursements in 1993 were
$187,688. There is no written agreement between the Company and Activated with
respect to such reimbursement payments.

Fleischman and Walsh, of which Director Fleischman is Senior Partner,
provides legal services to the Company and certain of its subsidiaries. See
"Management Compensation-Compensation Committee Interlocks and Insider
Participation".

STOCKHOLDER PROPOSALS

In order for any stockholder proposal to receive consideration for
inclusion in the Company's Proxy Statement for its 1995 Annual Meeting of
Stockholders, such proposals must be received by December , 1994, at the Com-
pany's offices at 504 Lavaca Street, Eighth Floor, Austin, Texas 78701,
Attention: Dennis K. Morgan, Secretary. The Company's Bylaws set forth certain
other requirements with respect to new or other business proposed to be brought
before the Meeting by a stockholder and with respect to any nomination by a
stockholder for election as a Director of any person other than the Nominees
selected by the Board of Directors.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand has served as the Certified Public Accountants of the
Company for the Company's fiscal year ended December 31, 1993. Representatives
of Coopers & Lybrand are expected to be present at the Meeting, and to be given
an opportunity to make a statement if they desire to do so and to be available
to respond to appropriate questions. The Audit Committee of the Board of
Directors of the Company presently expects to recommend to the Board, and the
Board is expected to approve, the selection of Coopers & Lybrand to serve as the
Company's Certified Public Accountants for the fiscal year ending December 31,
1994.

-23-

<PAGE>

OTHER BUSINESS

The Board of Directors is not aware of any matter, other than the matter
described above, to be presented for action at the Meeting. However, if any
other proper items of business should come before the Meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.

MISCELLANEOUS

The Company will pay the expenses of this proxy solicitation. In addition
to solicitation by mail, some of the officers and regular employees of the
Company may solicit proxies personally or by telephone, if deemed necessary.
Should management of the Company deem it necessary, the Company may also retain
the services of ,to aid in the solicitation of proxies
---------------------
for which the Company will pay a fee not to exceed $ plus
---------------
reimbursement for expenses. The Company will request brokers and other
fiduciaries to forward proxy-soliciting material to the beneficial owners of
shares which are held of record by them, and the Company may reimburse them
for reasonable out-of-pocket expenses incurred by them in connection therewith.

The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1993, which report includes financial statements and the Company's
Annual Report on Form l0-K for the fiscal year ended December 31, 1993, as filed
with the Securities and Exchange Commission on March , 1994, is being
----
mailed along with this Notice of Annual Meeting and Proxy Statement to all
holders of record of the Company's Common Stock as of the close of business
on the Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing to the Secretary or an Assistant
Secretary of the Company. Such Annual Report is not to be treated as part of
the Proxy Solicitation materials or as having been incorporated herein by
reference.

By Order of the Board of Directors,

DENNIS K. MORGAN
SECRETARY

Austin, Texas
April , 1994

-24-
<PAGE>
APPENDIX A

[CONFORMED COPY]

RESTATED CERTIFICATE OF INCORPORATION

SOUTHERN UNION COMPANY

SOUTHERN UNION COMPANY
AUSTIN, TEXAS

<PAGE>

RESTATED CERTIFICATE OF INCORPORATION

SOUTHERN UNION COMPANY, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:

1. The name of the corporation is Southern Union Company and the name
under which the corporation was originally incorporated is Southern
Union Utilities Company.

The date of filing its original Certificate of Incorporation with the
Secretary of State was December 13, 1932.

2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the
Certificate of Incorporation of this corporation as heretofore amended
or supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation.

3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments
or changes to read as herein set forth in full:

FIRST: The name of the corporation is Southern Union Company.

SECOND: The name of the county and the city, town or place within the
county in which the principal office or place of business of the corporation is
to be located in the State of Delaware and the street and number of such
principal office or place of business is: 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its Resident Agent is The
Corporation Trust Company, and the address by street and number of said Resident
Agent is 1209 Orange Street, City of Wilmington, State of Delaware.

THIRD: The nature of the business of the corporation or objects or
purposes to be transacted, promoted or carried on by it are:

(a) To mine for, prospect for, drill for, produce, store, refine, buy
or in any manner acquire, convert or manufacture into its several
products, and to market, sell, transport, and distribute natural
gas, manufactured gas, artificial gas and/or liquefied petroleum
gas, and any mixture or combination of any such gases, and any
derivatives or products or residual products or manufactured
products of such gases or any of them; to mine for, prospect for,
drill for, produce, buy or in any manner acquire, refine, convert
or manufacture into its several products, and to sell, market,
distribute and transport petroleum and its derivatives, products
and by-products and to construct, lay, purchase or in any manner
acquire, and to own, hold, maintain and operate, and to sell,
exchange, lease, encumber or in any manner dispose of works,
buildings, pipe lines, mains, distribution systems, machinery,
appliances, apparatus, facilities, rights, privileges, franchises,
ordinances and all such real and personal property as may be
necessary, useful or convenient in the production, acquisition,
sale,

A-1

<PAGE>

storage, combustion, refining, manufacturing, conversion,
transportation and marketing of natural gas, manufactured gas,
artificial gas, liquefied petroleum gas and petroleum, or any of
them, and the derivatives, products or by-products thereof,
however derived;

(b) To acquire, by purchase or otherwise, construct, lease, let, own,
hold, sell, convey, equip, maintain, operate and otherwise deal in
and with pipe lines, cars, vessels, tanks, tramways, refineries,
reduction plants, land and interests in land and any and all other
properties, conveyances, appliances, and apparatus for storing,
transporting, distributing, marketing, converting, manufacturing,
distilling, refining, reducing, preparing, or otherwise dealing in
and with petroleum, gas, gasoline, liquefied petroleum gases,
asphaltum, and any and all other minerals, metals and ores, and
the derivatives, products and by-products thereof, however
derived;

(c) To carry on the general business of an electric light, heat and
power company in all of its branches and to generate, buy or in
any manner acquire, accumulate, distribute, market and supply
electric current, light, heat and power to cities, towns, streets,
buildings and places, both public and private, and to any consumer
of electric energy for any purpose, and to construct, lay down,
establish, fix, and to carry on the business of electrical and
mechanical engineers, suppliers of electricity for the purpose of
light, heat and power or otherwise; to manufacture or deal in
things required for or capable of being used in connection with
the generation, distribution, accumulation, sale, improvement
and/or consumption of electricity;

(d) To carry on the business of telephone, telegraph and/or cable
company, and to establish, work, control, regulate, manage,
maintain and operate telephone lines and exchanges and to transmit
and facilitate the transmission of telephone, telegraph and/or
cable communications and messages; to construct, equip, maintain,
operate, lease and sell telephone, telegraph and cable lines and
systems and all kinds of works, machinery, apparatus, conveniences
and things capable of being used in connection with any of these
objects;

(e) To purchase, lease, or otherwise acquire, build, construct, erect,
hold, own, improve, enlarge, maintain, operate, control,
supervise, and manage, and to sell, lease, or otherwise dispose of
water and waterworks for the purpose of supplying municipalities,
corporations, and individuals with water for public, corporate,
business, irrigation, or domestic use; to construct, purchase,
lease or otherwise acquire, maintain, and operate dams,
reservoirs, settling basins, irrigation systems, pumping stations,
water towers, buildings, plants, machinery, distribution systems,
mains, pipes, conduits, aqueducts, meters, and all other necessary
apparatus, appliances, rights, permits and property used or useful
or convenient for use in the acquisition, distribution,
measurement, and sale of water;

(f) To manufacture ice and to buy, sell and generally deal in
artificial and/or natural ice both at wholesale and retail, to
purchase or otherwise acquire and to sell or otherwise dispose of
and maintain and operate ice manufacturing plants of all kinds and
descriptions; to carry on and conduct the business of storage,
cold storage, warehousing, refrigeration, freezing and all
business necessarily or impliedly incidental thereto;

A-2

<PAGE>

(g) To carry on the business of sewage disposal and to purchase, lease
or otherwise acquire, build, construct, erect, hold, own, improve,
enlarge, maintain, operate, control, supervise and manage sewers
and sewage disposal plants and systems for the purpose of
furnishing sewer and sewage disposal services to municipalities,
corporations, and individuals; and to own and acquire all
necessary apparatus, appliances, rights, permits and property used
or useful or convenient for use in connection therewith;

(h) To acquire, own, construct, erect, lay down, manage, maintain,
operate, enlarge, alter, work and use all such lands and interests
in land, buildings, easements, gas, electric and other works,
machinery, plant, stock, pipes, lamps, meters, fittings, motors,
apparatus, appliances, materials and things, and to supply all
such materials, products and things as may be necessary, incident
or convenient in connection with the production, use, storage,
manufacture, combustion, conversion, regulation, purification,
measurement, supply and distribution of any of the products of the
corporation;

(i) To carry on and conduct a general utility management, servicing,
operating, engineering and contracting business; to appraise,
value, design, build, construct, enlarge, develop, improve, extend
and repair light, heat, power, transmission and hydraulic plants,
electrical works, machinery and appliances, telegraph and
telephone lines, dams, reservoirs, canals, bridges, piers, docks,
mines, shafts, tunnels, wells, water works, street railways,
interurban railways, railways and buildings;

(j) To engage in and conduct any one or more or all of the businesses
classed as public utilities, particularly including but not
limited to the businesses of supplying any one or more of the
following, for employment in any manner for which the same may be
employed, to wit: power and energy, in the form of electric
current, as well as in every other form; heating from steam, hot
water or otherwise; natural gas, manufactured gas, artificial gas
and/or liquefied petroleum gas, ice, water, sewer, sewage
disposal, telephone, telegraph or cable service, cold storage and
warehousing;

(k) To obtain the grant of, purchase, lease, or otherwise acquire any
concessions, rights, options, patents, privileges, lands and
interests therein, rights of way, sites, properties, undertakings
or businesses, or any right, option or contract in relation
thereto, and to perform, carry out and fulfill the terms and
conditions thereof, and to carry the same into effect and to
develop, maintain, lease, sell, transfer, dispose of and otherwise
deal in and with the same;

(l) To subscribe for, or cause to be subscribed for, buy, own, hold,
purchase, receive, or acquire, and to sell, negotiate, guarantee,
assign, deal in, exchange, transfer, mortgage, pledge or otherwise
dispose of, shares of the capital stock, scrip, bonds, coupons,
mortgages, debentures, debenture stock, securities, notes,
acceptances, drafts and evidences of indebtedness issued or
created by other corporations, joint stock companies or
associations, whether public, private or municipal, or by any
corporate or unincorporated body, or by any government or
governmental subdivision or agency, and while the owner thereof,
to possess and to exercise in respect thereof all the rights,
powers and privileges of ownership, including the right to vote
thereon; to guarantee the payment of dividends on any shares of
the capital stock of any of the corporations, joint stock
companies or associations in which the corporation has or may at
any time have an interest, direct or indirect, and to become

A-3

<PAGE>

surety in respect of, endorse, or otherwise guarantee the payment
of the principal of or interest on any scrip, bonds, coupons,
mortgages, debentures, debenture stock, securities, notes, drafts,
bills of exchange or evidence of indebtedness, issued or created
by any such corporations, joint stock companies or associations;
to become surety for or guarantee the carrying out and performance
of any and all contracts, leases, and obligations of every kind of
any corporations, joint stock companies, or associations and in
particular of any corporation, joint stock company or association
any of whose shares, scrip, bonds, coupons, mortgages, debentures,
debenture stock, securities, notes, drafts, bills of exchange or
evidence of indebtedness, are at any time held by or for the
corporation, and to do any acts or things designed to protect,
preserve, improve or enhance the value of any such shares, scrip,
bonds, coupons, mortgages, debentures, debenture stock,
securities, notes, drafts, bills of exchange or evidences of
indebtedness;

(m) To organize, incorporate, reorganize, finance, and to aid and
assist, financially or otherwise, companies, corporations, joint
stock companies, syndicates, partnerships and associations of all
kinds, and to underwrite, subscribe for and endorse the bonds,
stocks, securities, debentures, notes or undertakings of any such
company, corporation, joint stock company, syndicate, partnership
or association, and to make any guarantee in connection therewith
or otherwise for the payment of money or for the performance of
any obligation or undertaking, and to do any and all things
necessary or convenient to carry any of such purposes into effect;
to buy, sell and otherwise deal in notes, open accounts and other
similar evidences of debt, and to loan money and to take notes,
open accounts and other similar evidences of debt as collateral
security therefor and to charge any lawful rate of interest in
connection therewith;

(n) To improve, manage, develop, sell, assign, transfer, lease,
mortgage, pledge, or otherwise dispose of or turn to account or
deal with all or any part of the property of the corporation, and
from time to time to vary any investment or employment of capital
of the corporation;

(o) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether
secured by mortgage, pledge, or otherwise, without limit as to
amount, and to secure the same by mortgage, pledge or otherwise;
and generally to make and perform agreements and contracts of
every kind and description;

(p) To manufacture, buy, sell, deal in and to engage in, conduct and
carry on the business of manufacturing, buying, selling, and
dealing in goods, wares, and merchandise of every class and
description;

(q) To the same extent as natural persons might or could do, to
purchase or otherwise acquire, and to hold, own, maintain, work,
develop, sell, lease, exchange, hire, convey, mortgage or
otherwise dispose of and deal in, lands and leaseholds, and any
interest, estate and rights in real property, and any personal or
mixed property, and any franchises, rights, licenses or privileges
necessary, convenient or appropriate for any of the purposes
herein expressed;

A-4

<PAGE>

(r) To apply for, obtain, register, purchase, lease or otherwise to
acquire and hold, own, use, develop, operate and introduce, and to
sell, assign, grant licenses, or territorial rights in respect to,
or otherwise to turn to account or dispose of, any copyrights,
trademarks, trade names, brands, labels, patent rights, letters
patent of the United States or of any other country or government,
inventions, improvements and processes, whether used in connection
with or secured under letters patent or otherwise;

(s) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of
the objects or the furtherance of any of the powers hereinbefore
set forth, either along or in association with other corporations,
firms or corporations, firms or individuals, and to do every other
act or acts, thing or things, incidental or appurtenant to or
growing out of or connected with the aforesaid business or powers
or any part or parts thereof, provided the same to be not
inconsistent with the laws under which the corporation is
organized;

(t) The business or purpose of the corporation is from time to time to
do any one or more of the acts and things hereinabove set forth,
and it shall have power to conduct and carry on its said business,
or any part thereof, and to have one or more offices, and to
exercise all or any of its corporate powers and rights, in the
State of Delaware, and in any one or more of the various other
states, territories, colonies, dependencies of the United States,
in the District of Columbia, and in all or any foreign countries.

The foregoing clauses shall be construed both as objects and powers, and it
is hereby expressly provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of the
corporation and are in furtherance of, and in addition to, and not in limitation
of the general powers conferred by the laws of the State of Delaware.

FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue shall be 51,500,000 of which 1,500,000
shares shall be Cumulative Preferred Stock without par value (the "Preferred
Stock"), and 50,000,000 shares shall be common stock of the par value of $1.00
per share (the "Common Stock").

The following is a statement of certain of the designations, powers,
preferences and relative, participating, voting, optional and other special
rights, and of the qualifications, limitations and restrictions thereof, in
respect of the stock of such classes, together with the grant of authority to
the Board of Directors of the corporation to fix by resolution or resolutions,
in respect of any series of the Preferred Stock, the remainder of the
designations, powers, preferences and relative, participating, voting, optional
and other special rights, and of the qualifications, limitations and
restrictions thereof;

(1) The Preferred Stock is senior to the Common Stock, and the Common Stock
is junior to and subject to all rights and preferences of the Preferred
Stock, to the extent and in the particulars hereinafter set forth or
provided for in the resolution or resolutions of the Board of Directors
with respect to the Preferred Stock adopted as herein authorized.

A-5

<PAGE>

(2) The Preferred Stock may be issued from time to time in one or more
series in any manner permitted by law, as determined from time to time
by the Board of Directors and stated in the resolution or resolutions
providing for the issue of such stock adopted by the Board of Directors
pursuant to authority hereby vested in it, each series to be
appropriately designated, prior to the issue of any shares thereof, by
some distinguishing rate of dividend, number, letter or title. All
shares of each series of Preferred Stock shall be alike in every
particular (except as to the date from which dividends shall commence
to accrue) and all shares of Preferred Stock shall be of equal rank and
have the same powers, preferences, and rights and shall be subject to
the same qualifications, limitations and restrictions, without
distinction between the shares of different series thereof, except only
in regard to the following particulars, which may be different in the
different series:

(a) the amount or amounts payable, together with accrued dividends to
the date of distribution as hereinafter provided, to holders
thereof upon any involuntary liquidation, dissolution or winding-
up of the corporation (such amount or amounts, exclusive of such
accrued dividends, being hereinafter referred to as the "Stated
Value" of the shares in question), provided, however, that the
aggregate Stated Value of all shares of Preferred Stock at any
time outstanding shall not exceed $60,000,000;

(b) the annual rate or rates of dividends payable on shares of such
series and the dates from which such dividends shall commence to
accrue;

(c) the amount or amounts payable upon redemption thereof and, subject
to applicable provisions of the Restated Certificate of
Incorporation, as amended, the manner of effecting such
redemption;

(d) the preferential amount or amounts payable to holders thereof upon
any voluntary liquidation, dissolution or winding-up of the
corporation;

(e) the provisions of any sinking, purchase and/or analogous funds, if
any, with respect thereto (including provisions, if any, with
respect thereto requiring the corporation to set aside funds with
which to purchase and acquire shares thereof, or to attempt to
purchase and acquire shares thereof, at prices not exceeding the
redemption price from time to time applicable);

(f) the terms and rates of conversion and/or exchange thereof, if
convertible and/or exchangeable;

(g) the provisions as to voting rights, if any, and/or as to other
restrictions and limitations, if any, created for the benefit and
protection of holders of Preferred Stock of one or more series,
additional to provisions contained in this Article FOURTH for the
benefit and protection of all holders of Preferred Stock; and

(h) the provisions, if any, for reimbursement by the corporation to
the holders of shares of one or more series, of the amount of
certain taxes paid by them, to the extent it can do so from funds
which at the time might be properly applied (under the laws of the
State of Delaware and under the provisions of the Restated
Certificate of Incorporation, as amended, and under resolutions of
the Board of

A-6

<PAGE>

Directors adopted as herein authorized) to the payment of
dividends on shares of the corporation ranking junior to the
Preferred Stock as to dividends.

The designations of each series of Preferred Stock and its terms,
preferences, powers and rights and qualifications, limitations or restrictions
thereof in respect of the foregoing particulars shall be fixed and determined by
the Board of Directors in any manner permitted by law and stated in the
resolution or resolutions providing for the issue of such stock adopted by the
Board of Directors, pursuant to authority herein vested in it, before any shares
of such series are issued (or, in the event of any change as contemplated by
subparagraph (b) of Clause (7) of this Article FOURTH, after the issuance of
such shares). Subject to the provisions of such resolution or resolutions the
Board of Directors may from time to time increase the number of shares of any
series of Preferred Stock already created by providing that unissued shares of
Preferred Stock, or any shares of Preferred Stock of a different series
reacquired or redeemed by the corporation and not then outstanding, shall
constitute part of such series, and/or may decrease (but not below the number of
shares thereof then outstanding) the number of shares of any series of Preferred
Stock already created by providing that any unissued shares, or any shares
reacquired or redeemed by the corporation and not then outstanding, previously
assigned to such series shall no longer constitute part thereof, and/or may
classify or reclassify any unissued Preferred Stock or any shares reacquired or
redeemed by the corporation and not then outstanding, by fixing or altering the
terms thereof in respect of any of the above-mentioned particulars and by
assigning the same to an existing or newly created series from time to time
before the issuance of such stock.

(3) The Preferred Stock of each series shall be entitled to receive, and
the corporation shall be bound to pay thereon, but only as and when
declared by the Board of Directors, out of any assets, profits or funds
of the corporation at the time legally available therefor, cumulative
cash dividends at the annual rate which shall be fixed by the Board of
Directors for such series as herein authorized, and no more, payable
quarterly on the fifteenth days of March, June, September and December
in each year. Such dividends shall be cumulative, shall be deemed to
accrue from day to day regardless of whether or not earned or declared,
and shall commence to accrue on each share of Preferred Stock either:

(a) from such date, if any, as may be fixed by the Board of Directors
prior to the issue thereof;

(b) if no such date is fixed and if such shares shall be issued in the
period following a dividend record date fixed for the series of
which it is a part and up to and including the dividend payment
date for which such record was taken, then from such dividend
payment date; or

(c) otherwise from the dividend payment date next preceding the date
of issue of such share, or if such share shall be issued on a
dividend payment date, from such dividend payment date.

The corporation in making any dividend payment upon the Preferred Stock
shall make dividend payments ratably upon all outstanding shares of Preferred
Stock in proportion to the amount of the dividends accrued thereon to the date
of such dividend payment. Accumulations of dividends shall not bear interest.

A-7

<PAGE>

In no event, so long as any Preferred Stock shall remain outstanding, shall
any dividend whatsoever (other than a dividend payable in shares of stock of the
corporation ranking junior to the Preferred Stock as to dividends and assets) be
declared or paid upon, nor shall any distribution be made or ordered in respect
of, the Common Stock or any other class of stock ranking junior to the Preferred
Stock as to dividends or assets, nor shall any moneys (other than the net
proceeds received from the sale of stock ranking junior to the Preferred Stock
as to dividends and assets) be set aside for or applied to the purchase or
redemption (through a sinking fund or otherwise) of shares of Common Stock or of
any other class of stock ranking junior to the Preferred Stock as to dividends
or assets, unless:

(i) all dividends on all outstanding shares of Preferred Stock of all
series for all past dividend periods shall have been paid and the
full dividend on all outstanding shares of Preferred Stock of all
series for the then current quarterly dividend period shall have
been paid or declared and set apart for payment; and

(ii) the corporation shall have set aside all amounts, if any,
theretofore required to be set aside as and for sinking, purchase
and/or analogous funds, if any, for the Preferred Stock of all
series.

(4) The corporation, at the option of the Board of Directors, may at any
time redeem the whole, or from time to time may redeem any part, of the
Preferred Stock, by paying therefor in cash the amount fixed by the
Board of Directors for redemption of shares of such series as herein
authorized, such sum being hereinafter in this Clause (4) referred to
as the "redemption price." If less than all of the outstanding shares
of Preferred Stock are to be called for redemption, redemption may be
made of the whole or any part of the outstanding shares of any one or
more series, in the discretion of the Board of Directors, and if less
than all outstanding shares of any series are to be redeemed, the
shares to be redeemed shall be selected by whichever of the following
methods the Board of Directors shall choose: by lot or pro rata in
such manner as may be prescribed by resolution of the Board of
Directors. Not more than sixty (60) days and not less than thirty (30)
days prior to the redemption date, notice of the proposed redemption
shall be mailed to the holders of record of the shares of Preferred
Stock to be redeemed, such notice to be addressed to each such
stockholder at his last known post office address shown on the records
of the corporation and the time of mailing such notice shall be deemed
to be the time of the giving thereof. On or after the date of
redemption stated in such notice (sometimes referred to in this Clause
(4) as the "redemption date"), each holder of shares of Preferred Stock
called for redemption shall surrender his certificate(s) for such
shares to the corporation (endorsed if required) at the place
designated in such notice and shall thereupon be entitled to receive
payment of the redemption price. In case less than all the shares
represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. If
such notice of redemption shall have been given as aforesaid, and if on
or before the redemption date funds necessary for the redemption shall
have been set aside so as to be and continue available therefor, then,
notwithstanding that the certificates representing any shares of
Preferred Stock so called for redemption shall not have been
surrendered, such shares shall not be deemed to be outstanding for any
purpose, the dividends thereon shall cease to accrue after the
redemption date, and all rights with respect to the shares so called
for redemption shall forthwith after such redemption date cease and
determine, except only the right of the holders of certificates issued
to represent such shares to receive the redemption

A-8

<PAGE>

price without interest, upon endorsement, if required, and surrender of
said certificates. If such notice of redemption of all or any part of
the Preferred Stock shall have been mailed as aforesaid and the
corporation shall thereafter deposit money for the payment of the
redemption price pursuant thereto with any bank or trust company
(referred to in this Clause (4) as to the "depository") in Dallas,
Texas, or Chicago, Illinois, having a combined capital and surplus of
not less than $2,000,000 selected by the Board of Directors for that
purpose, to be applied to such redemption, then from and after the
making of such deposit such shares shall not be deemed to be
outstanding for any purpose and the rights of the holders of
certificates issued to represent such shares shall be limited to the
right to receive payment of the redemption price (without interest)
from the depository upon endorsement, if required, and surrender of
said certificates; provided, however, that no then existing right of
conversion or exchange, if any, with respect to such shares shall be
impaired by such deposit. Any moneys so deposited which shall not be
required for such redemption because of the exercise of any such right
of conversion or exchange subsequent to the date of such deposit and
prior to the expiration of such right shall be returned to the
corporation forthwith. The corporation shall be entitled to receive,
from time to time, from the depository the interest, if any, allowed on
such moneys deposited with it, and the holders of certificates issued
to represent any shares so redeemed shall have no claim to any such
interest. Any moneys so deposited and remaining unclaimed at the end
of six (6) years from the redemption date shall, if thereafter
requested by resolution of the Board of Directors, be repaid to the
corporation, and in the event of such repayment to the corporation,
such holders of certificates issued to represent the shares so called
for redemption as shall not have made claim against such moneys prior
to such repayment to the corporation shall be deemed to be unsecured
creditors of the corporation for an amount equivalent to the amount
deposited as the redemption price of such shares and so repaid to the
corporation, but shall in no event be entitled to any interest.

The corporation shall not at any time redeem, or purchase or otherwise
acquire less than all of the shares of Preferred Stock at the time
outstanding, unless full dividends with respect to all past dividend
periods and for the current dividend period have been paid or declared
and set apart for payment on all shares of the Preferred Stock then
outstanding and not then to be redeemed, purchased or otherwise
acquired by the corporation; provided, however, if the corporation has
paid or declared and set apart for payment full dividends with respect
to all past dividend periods on such shares, it shall not be required
to pay or declare and set apart for payment dividends on such shares
for any current dividend period during which it may redeem, purchase or
otherwise acquire shares of Preferred Stock of any series, at prices
not exceeding the redemption price then applicable to such series, in
pursuance of any sinking, purchase and/or analogous fund for shares of
such series.

Subject only to any applicable provisions of law and of the Restated
Certificate of Incorporation, as amended, and to limitations, if any,
placed upon the exercise of such right by resolution or resolutions
adopted by the Board of Directors providing for the issue of Preferred
Stock, as herein authorized, the corporation shall have the right to
purchase, hold, sell and transfer shares of its own stock of any class
or series; provided, that no such shares shall be deemed to be
outstanding for any purpose during any time that it belongs to or is
held by the corporation.

A-9

<PAGE>

Shares of Preferred Stock of any particular series may also be subject
to redemption through operation of any sinking or analogous fund
created for such series, at the prices and under the terms and
provisions fixed for such fund by the Board of Directors as herein
authorized.

(5) Upon any involuntary liquidation, dissolution or winding-up of the
corporation, holders of the Preferred Stock of each series shall be
entitled, before any distribution shall be made to the Common Stock or
to any other class of stock ranking junior to the Preferred Stock as to
dividends or assets, to be paid the Stated Value per share plus accrued
dividends to the date of distribution; and upon any voluntary
liquidation, dissolution or winding-up of the corporation, holders of
the Preferred Stock of each series shall be entitled before any
distribution shall be made to the Common Stock or to any other class of
stock ranking junior to the Preferred Stock as to dividends or assets,
to be paid the full preferential amount or amounts fixed by the Board
of Directors for such series as herein authorized; but the Preferred
Stock shall not be entitled to any further payment and any remaining
net assets shall be distributed in accordance with the provisions
hereinafter set forth in this Article FOURTH to the Common Stock. If
upon such liquidation, dissolution or winding-up of the corporation,
whether voluntary or involuntary, the net assets of the corporation
shall be insufficient to permit the payment to holders of all
outstanding shares of Preferred Stock of all series of the full
preferential amounts to which they are respectively entitled as
aforesaid, then the entire net assets of the corporation shall be
distributed ratably to holders of all outstanding shares of Preferred
Stock in proportion to the full preferential amount or amounts to which
each such share is entitled as aforesaid. Neither a consolidation nor
merger of the corporation with or into any other corporation or
corporations, nor the sale, lease or exchange of all or substantially
all of the assets of the corporation shall be deemed to be a
liquidation, dissolution or winding-up within the meaning of this
Article FOURTH.

(6) Except as otherwise specifically provided in the Restated Certificate
of Incorporation, as amended, or in the resolution or resolutions
adopted by the Board of Directors, as herein authorized, or as
otherwise expressly required by applicable law, the Preferred Stock
shall not have any right to vote for the election of directors or for
any other purpose:

Provided, however, that if and whenever dividends on the Preferred
Stock shall be in arrears and such arrearages shall aggregate an amount
equal to at least six (6) quarterly dividends thereon, the Preferred
Stock shall have the right, voting as a class, to elect two members of
the Board of Directors of the corporation, and such right shall
continue and be exercisable at each election of directors of the
corporation until all arrearages in dividends on the Preferred Stock
shall have been paid in full to holders of the Preferred Stock and the
current quarterly dividend thereon for the current quarterly dividend
period shall have been declared and set apart for payment, and
thereupon all voting rights given by this proviso shall be divested
from the Preferred Stock (subject, however to being at any time or from
time to time similarly revived and divested). At any time after the
holders of the Preferred Stock shall have thus become entitled to elect
two members of the Board of Directors of the corporation, the Secretary
of the corporation may, and upon the written request of holders of
record of at least 10% in Stated Value of the Preferred Stock then
outstanding addressed to him at the statutory office of the corporation
in Delaware shall, call a special meeting of the holders of the
Preferred Stock for the purpose of electing such two directors, to be
held, within forty days of the receipt of such request, at the
principal business office of the corporation, upon

A-10

<PAGE>

the notice then provided by law and the by-laws for the holding of
special meetings of stockholders; provided, however, that the Secretary
need not call any such special meeting at the request of such holders
of Preferred Stock if a regular meeting of stockholders for the
election of directors is to convene within ninety days after receipt by
the Secretary of such request. If such special meeting is required to
be called by the foregoing provisions but is not called by the
Secretary within twenty days after receipt of such request, then the
holders of record of 10% or more in Stated Value of the Preferred Stock
then outstanding may designate in writing one of their number to call
such meeting at the place and upon the notice above provided, and any
person so designated shall have access to the stock books of the
corporation for such purpose. At any such special meeting or at any
regular meeting for the election of directors at which the holders of
Preferred Stock shall be entitled to elect two directors as aforesaid,
the holders of a majority in Stated Value of the then outstanding
shares of Preferred Stock present in person or by proxy shall be
sufficient to constitute a quorum for the election of such two
directors, which shall be elected by vote of holders of Preferred Stock
having a plurality in Stated Value. The persons so elected by holders
of the Preferred Stock as directors, together with the directors
elected by the Common Stock or any other class or classes of stock
having voting rights for the election of directors, shall constitute
the Board of Directors of the corporation. Concurrently with the first
election of two (2) directors by holders of the Preferred Stock after
any vesting of the voting right hereinabove provided for, the number of
directors constituting the Board shall be increased by two (2), and
concurrently with the divestment of such right, as aforesaid, the
number of such directors shall be reduced by two (2) and any person
theretofore elected pursuant to such right shall automatically cease to
be a member of the Board of Directors. Holders of the Preferred Stock
shall be entitled at any election of directors where they are
authorized to vote, whether a special election called for their benefit
or a regular election, to exercise with respect to the two directors to
be elected by such holders cumulative voting rights, if and to the
extent that cumulative voting rights are provided for all stockholders
of the corporation elsewhere in the Restated Certificate of
Incorporation, as amended.

Provided, further, that any series of Preferred Stock shall have such
additional voting rights, if any (in addition to the voting rights in
this Article FOURTH given to all Preferred Stock), as shall be stated
and expressed in the resolution or resolutions providing for the issue
of such series adopted by the Board of Directors of the corporation, as
herein authorized, prior to the issuance of any shares of such series.

If less than a quorum of the outstanding Preferred Stock shall be
represented at any meeting at which holders of such stock have a right
to vote by class on any matter, whether provided for by law or in the
Restated Certificate of Incorporation, as amended, or in the resolution
or resolutions adopted by the Board of Directors providing for issue of
any such stock, as herein authorized, the meeting may, nevertheless,
proceed to transact any business and to make any determination for the
purpose of which a quorum exists, including the election by other
stockholders of directors which such other stockholders are entitled to
elect, and such meeting with respect to the Preferred Stock may be
adjourned from time to time, by affirmative action of a majority of
such stock represented in person or by proxy, until a quorum exists for
the determination of any matter, including the election of directors,
by holders of such Preferred Stock.

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<PAGE>

While any of the Preferred Stock shall be outstanding the by-laws of
the corporation shall be (and are by action of the stockholders)
amended and supplemented to the extent necessary that such by-laws
shall be consistent with provisions of the Restated Certificate of
Incorporation, as amended, respecting voting rights of holders of the
Preferred Stock and the exercise thereof, and similar provisions, if
any, contained in the resolution or resolutions adopted by the Board of
Directors as herein authorized.

Except as otherwise expressly provided hereinabove in this Clause (6)
and hereinbelow in Clauses (7) and (8) of this Article FOURTH with
respect to the Preferred Stock and except as otherwise may be required
by law or expressly provided in the resolution or resolutions adopted
with respect to the Preferred Stock by the Board of Directors as herein
authorized, the Common Stock shall have the exclusive rights to vote
for the election of directors and on all other matters and questions.
Each stockholder entitled to vote at any particular time on any matter
or question shall have one vote on each such matter or question for
each share of stock held of record by him and entitled to voting rights
at the time such vote is taken, except that each holder of Preferred
Stock so entitled to vote shall have one vote for each $100.00 in
Stated Value of the shares of Preferred Stock so held by him (or in the
corresponding fraction of one vote in the case of any holder of less
than $100.00 in Stated Value).

Whenever holders of the Preferred Stock shall have become and then
remain entitled to vote upon any matter or question, and only then,
they shall be entitled to receive notice of any stockholders' meeting
to be held with respect to such matter or question.

Except as provided hereinbelow in Clauses (7) and (8) of this Article
FOURTH, one or more additional classes of stock may be authorized and
the amount of the authorized stock of any class or classes of the
corporation may be increased or decreased by the affirmative vote of
the holders of a majority of the outstanding Common Stock of the
corporation.

(7) So long as any shares of the Preferred Stock are outstanding, the
corporation shall not, without the affirmative vote at a meeting (the
notice of which shall state the general character of the matters to be
submitted thereat), or the written consent with or without a meeting,
of the holders of at least 66-2/3% in Stated Value of the then
outstanding shares of Preferred Stock:

(a) authorize or create, or increase the authorized amount of, any
additional class of stock ranking prior to or on a parity with the
Preferred Stock as to dividends or assets; or authorize or create,
or increase the authorized amount of, any class of stock or
obligations convertible into or evidencing the right to purchase
any class of stock ranking prior to or on a parity with the
Preferred Stock as to dividends or assets;

A-12

<PAGE>

outstanding shares of Preferred Stock of any particular series
(one or more) without correspondingly affecting the rights,
preferences or powers of the outstanding shares of all series,
then a like vote or consent by the holders of at least 66-2/3% in
Stated Value of the Preferred Stock of the affected series (one or
more) at the time outstanding shall also be necessary for
effecting or validating any such amendment, alteration or repeal;

(c) sell, lease, or convey all, or substantially all, of its property
or business; or voluntarily liquidate, dissolve or wind up its
business;

(d) effect the merger or consolidation of the corporation into or with
any other corporation, or the merger of any other corporation into
the corporation, unless the corporation resulting from or
surviving such merger or consolidation will upon consummation of
such merger or consolidation have no class of stock and no other
securities, either authorized or outstanding, ranking prior to or
on a parity with the Preferred Stock, except the same number of
shares (or aggregate par value or Stated Value) of stock and the
same principal amount of other securities with the same rights and
preferences as the stock and other securities of the corporation
respectively authorized and outstanding immediately preceding such
merger or consolidation and unless each holder of the Preferred
Stock immediately preceding such merger or consolidation shall
receive or retain the same number of shares (or aggregate par
value or Stated Value) of stock with the same rights and
preferences of the resulting or surviving corporation.

(8) So long as any shares of Preferred Stock are outstanding, the
corporation shall not, without the affirmative vote at a meeting (the
notice of which shall state the general character of the matters to be
submitted thereat) or the written consent with or without a meeting, of
the holders of at least a majority in Stated Value of the then
outstanding shares of Preferred Stock, increase the authorized amount
of Preferred Stock, or decrease the authorized amount of Preferred
Stock.

(9) Subject to all of the rights of the Preferred Stock, dividends may be
paid upon the Common Stock as and when declared by the Board of
Directors.

(10)Dividends upon the stock of the corporation of any class shall be
payable only out of assets, profits or funds of the corporation at the
time legally available therefor, and only when and as declared by the
Board of Directors. The Board of Directors shall have power to
determine whether any, and, if any, what part of such available assets,
profits or funds shall be declared as dividends and paid to its
stockholders; and all rights of holders of stock of the corporation of
any class in respect of dividends shall be subject to the power of the
Board of Directors so to do.

(11)The following terms, wherever used in this Article FOURTH, or in any
resolution or resolutions heretofore or hereafter adopted by the Board
of Directors as herein authorized, shall be deemed to have the
following meanings.

A-13

<PAGE>

"Paid", whenever used with reference to dividends on any class or
series of the corporation's stock shall mean paid in fact or tendered
(including payment or tender by check or draft drawn by the corporation
or its dividend paying agent) to holders of the stock entitled to
receive such dividends, or set apart for payment to and made available
to or subject to claim by such holders, irrespective of inability of
the corporation or its paying agent to effect delivery of such
dividends or of failure or refusal on the part of such holders, or any
one or more of them, to reduce such dividends to possession.

"Accrued dividends" or "dividends accrued", whenever used with
reference to the Preferred Stock or any series thereof shall be deemed
to mean an amount which shall be equal to dividends thereon at the rate
per annum fixed by the Board of Directors as herein authorized for a
particular series, computed from the date on which such dividends began
to accrue on such shares to the date to which dividends are stated to
accrue, less the aggregate amount of dividends theretofore and on such
date paid thereon.

"Board of Directors", when not otherwise specified, shall mean the
Board of Directors of Southern Union Company at the time elected and
acting.

"Subsidiary" shall mean any corporation of which more than fifty per
cent (50%) of the outstanding stock (other than directors' qualifying
shares, if any) having by the terms thereof ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned by the corporation, or by any subsidiary, or by the
corporation and any one or more subsidiaries.

"Consolidated subsidiary" shall mean any subsidiary the accounts of
which shall have been consolidated with those of the corporation in the
financial statements in the latest annual report of the corporation to
its stockholders or, if not so consolidated, the accounts of which are
proposed by the corporation to be consolidated with its own accounts in
the financial statements in the next succeeding annual report of the
corporation to its stockholders.

"Consolidated net income of the corporation and its consolidated
subsidiaries" shall mean the balance remaining after deducting from the
consolidated earnings and other income and profits of the corporation
and its consolidated subsidiaries (including non-operating profits, but
excluding any gain or loss realized upon the sale or other disposition
of fixed property or other capital assets not made in the ordinary
course of business and also upon the acquisition, redemption or
retirement or sale of the securities of the corporation or of any
consolidated subsidiary) all expenses and charges of every proper
character, including interest, amortization of debt discount and
expense, provision for all taxes (except and excluding taxes on account
of any gain excluded above), adequate provision for depreciation,
depletion and obsolescence, amounts appropriated under any plan of the
corporation or of any consolidated subsidiary for extra compensation
for, or pension to, officers and employees, dividends accrued on
preferred stock of consolidated subsidiaries not owned by the
corporation or another consolidated subsidiary, provision for net
earnings applicable to all minority interests in common stock of
consolidated subsidiaries, and proper reserves determined in good faith
by the Board of Directors of the corporation or of a consolidated

A-14

<PAGE>

subsidiary, as the case may be, in its discretion, all based upon a
statement of income and profit and loss consolidating the accounts of
the corporation and its consolidated subsidiaries prepared in
accordance with generally accepted principles of accounting.

"Consolidated net income available for interest of the corporation and
its consolidated subsidiaries" shall be determined in the same manner
as "consolidated net income of the corporation and its consolidated
subsidiaries" except that (1) no deduction shall be made for interest
paid on funded debt, (2) if any property of the corporation or of a
consolidated subsidiary shall have been acquired by it during any
period for which such determination is made or shall be so acquired
before or contemporaneously with the issuance of additional stock then
proposed to be issued, the net income from such property during the
period, or such part thereof as shall have preceded acquisition by the
corporation or its consolidated subsidiary, as the case may be, to the
extent not otherwise included, shall be included as a part of the
consolidated net income of the corporation and its consolidated
subsidiaries computed in the same manner as specified above except that
federal taxes with respect to income from such property shall be
adjusted as if such property had been owned by the corporation or its
consolidated subsidiary during the entire period in question, and (3)
if within such period or prior to or contemporaneously with the
issuance of the additional stock, the corporation or a consolidated
subsidiary shall have disposed of any property, voluntarily or through
exercise of eminent domain or otherwise, then the net income
(estimated, if necessary) from such property for the whole of the
period in question shall be excluded from the consolidated net income
of the corporation and its consolidated subsidiaries in such
computation and federal taxes with respect to income shall be adjusted
in making such computation as if such property had been disposed of
prior to the period in question.

"Funded debt" shall mean indebtedness which by its terms matures more
than one year from the date of its creation.

(12)The Board of Directors of the corporation at a meeting duly called and
held on the 29th day of January 1990 did duly adopt resolutions
authorizing the creation of a series of Series A 10% CUMULATIVE
PREFERRED STOCK stating that 250,000 shares of authorized and unissued
Cumulative Preferred Stock shall belong to such series, and setting
forth a statement of the designations, powers preferences and rights,
and the qualifications, limitations and restrictions thereof.

The following is a statement of the powers, preferences and rights, and
the qualifications thereof, of such series which has not been set forth
in the Restated Certificate of Incorporation:

Section 1. DESIGNATION AND AMOUNT.

The shares of such series shall be designated as "Series A 10%
Cumulative Preferred Stock" and the number of shares constituting such
series shall be 250,000.

A-15

<PAGE>

Section 2. DIVIDENDS AND DISTRIBUTIONS.

(a) The amount payable, exclusive of accrued dividends, per share to
holders of Series A 10% Cumulative Preferred Stock upon any
involuntary liquidation, dissolution or winding-up of the
corporation (such amount being the "Stated Value" of the Series A
10% Cumulative Preferred Stock) shall be $100. The amount payable
with respect to any voluntary liquidation, dissolution of winding-
up of the corporation shall be as specific in paragraph (d) of
this Section 2.

(b) The annual rate of dividends payable on the shares of Series A 10%
Cumulative Preferred Stock shall be 10% per annum, and such
dividends shall commence to accrue from the date of issue thereof.
The payment of dividends is restricted as set forth in Section 3
below.

(c) The amounts payable per share upon redemption of the shares of the
Series A 10% Cumulative Preferred Stock shall be the following
prices per share if redeemed during the 12-month period beginning
June 15 in each of the indicated years:
<TABLE>
<CAPTION>

If Redeemed During 12-month
Period Beginning June 15 Price Per Share
------------------------ ---------------
<S> <C>
1989 $107
1990 107
1991 106
1992 105
1993 104
1994 103
1995 102
1996 101
</TABLE>

plus in each case an amount equal to dividends accrued to the
redemption date on shares redeemed; PROVIDED, HOWEVER, that in the
case of shares of the Series A 10% Cumulative Preferred Stock
redeemed through operation of the sinking fund provided for in
paragraph (e) of this Section 2 the amount payable per share upon
redemption shall be $100 (hereinafter referred to as the "Sinking
Fund Redemption Price") plus an amount equal to accrued dividends
to the redemption date; FURTHER PROVIDED that prior to June 15,
1992, no Series A 10% Cumulative Preferred Stock may be redeemed,
directly or indirectly, from the proceeds of or in anticipation of
any refunding operation by the application, directly or
indirectly, of borrowed funds or the proceeds of the issue of any
stock ranking prior to or on a parity with the Series A 10%
Cumulative Preferred Stock as to dividends or assets, if the
effective cost of money to the corporation of such borrowing or
other security issue (calculated in accordance with generally
accepted financial practice) is less on an annual basis than the
dividend rate of the Series A 10% Cumulative Preferred Stock.

A-16

<PAGE>

(d) The preferential amount to be paid to holders of the Series A 10%
Cumulative Preferred Stock upon any voluntary liquidation,
dissolution or winding-up of the corporation shall be an amount
per share equal to the amount per share at which shares of the
Series A 10% Cumulative Preferred Stock could on the date of
distribution be redeemed (otherwise than through operation of the
sinking fund) under the provisions of the immediately preceding
paragraph (c).

(e) The corporation shall, if such shares are available for
redemption, redeem on June 15, in each of the years 1993 through
1997, both inclusive, after full dividends have been paid on all
series of the Preferred Stock outstanding for all past quarterly
dividend periods and for the quarterly dividend period then
ending, 50,000 shares of the Series A 10% Cumulative Preferred
Stock (hereinafter referred to as the "Mandatory Sinking Fund
Redemption") plus, at the option of the corporation, up to but not
exceeding an additional 50,000 shares of the Series A 10%
Cumulative Preferred Stock (hereinafter referred to as the
"Optional Sinking Fund Redemption"), provided that the right to
redeem shares pursuant to the Optional Sinking Fund Redemption
shall not be cumulative and shall not reduce the sinking fund
requirements in any subsequent year. Any such redemption is
hereinafter referred to as a "Sinking Fund Redemption", and the
date on which said Sinking Fund Redemption is to be made as
specified above is hereinafter referred to as the "Sinking Fund
Redemption Date."

The corporation shall have the right to anticipate all or part of
a Sinking Fund Redemption and the retirement of the balance of the
outstanding shares of Series A 10% Cumulative Preferred Stock by
applying against such redemption or retirement the shares of
Series A 10% Cumulative Preferred Stock purchased or otherwise
acquired from the holders of such shares, otherwise than through
the operation of the sinking fund, which have not been previously
so applied.

Whenever the corporation shall call shares of the Series A 10%
Cumulative Preferred Stock for redemption at the Sinking Fund
Redemption Price, it shall set aside on or before the Sinking Fund
Redemption Date a further sum of money equivalent to the amount of
accrued dividends to the Sinking Fund Redemption Date with respect
to the shares so called for redemption.

On June 14 in each of the years 1993 through 1997, inclusive, the
corporation shall set aside a sum sufficient for the Mandatory
Sinking Fund Redemption and Optional Sinking Fund Redemption (if
any).

Shares of the Series A 10% Cumulative Preferred Stock that are
purchased or redeemed through the use of monies in the sinking
fund shall no longer constitute shares of the Series A 10%
Cumulative Preferred Stock shall be issued in lieu thereof, and
such purchased or redeemed shares shall have the status of
authorized but unissued preferred stock without designation as to
series until such time as they shall be reissued as shares of one
or more series of Preferred Stock other than Series A 10%
Cumulative Preferred Stock.

The provisions of the Restated Certificate of Incorporation in
Clause (4) of Article FOURTH with respect to redemption generally
of the Preferred Stock, shall apply to the redemption of Series A
10%

A-17

<PAGE>

Cumulative Preferred Stock through operation of the sinking fund,
and the shares of such series to be so redeemed from time to time
shall be selected by lot or pro rata in such manner as may be
prescribed by the Board of Directors.

(f) No provision is made for the conversion or exchange of Series A
10% Cumulative Preferred Stock for or into any other security of
the corporation.

Section 3. CERTAIN RESTRICTIONS.

(a) So long as any shares of Series A 10% Cumulative Preferred Stock
shall be outstanding, the corporation shall not, without the
affirmative vote at a meeting (the notice of which shall state the
general character of the matters to be submitted thereat), or the
written consent with or without a meeting, of the holders of at
least two-thirds of the then outstanding shares of Series A 10%
Cumulative Preferred Stock, issue any additional share of
Preferred Stock of the corporation other than the 250,000 shares
of Series A 10% Cumulative Preferred Stock provided for in this
Certificate, or any shares of any other stock of the corporation
ranking prior to or on a parity with the Preferred Stock as to
dividends or assets, unless consolidated net income available for
interest of the corporation and its consolidated subsidiaries (as
defined in Clause (11) of Article FOURTH of the corporation's
Restated Certificate of Incorporation) for a period of twelve
consecutive calendar months out of the sixteen calendar months
immediately preceding the date of such issuance shall have been at
least one and one-half times the aggregate of:

(1) the annual interest charges on all funded debt (as defined
in Clause (11) of Article FOURTH of the Restated Certificate
of Incorporation) of the corporation and its consolidated
subsidiaries then outstanding (excluding funded debt to be
retired concurrently with such issuance, but including
funded debt, if any, to be issued concurrently with such
issuance); and

(2) the sum of (i) the annual dividend requirements of all
shares of Preferred Stock of the corporation, and on all
shares of any other stock of the corporation ranking prior
to or on a parity with the Preferred Stock as to dividends
or assets, then outstanding (but excluding the annual
dividend requirements on any of such stock being retired by
the corporation concurrently with such issuance) and (ii)
the annual dividend requirements on such stock then being
issued; provided, that any stock issued upon an express
finding by the Board of Directors, made in good faith, that
the applicable conditions of this Section are satisfied,
shall be valid stock.

(b) Notwithstanding provisions of the Restated Certificate of
Incorporation authorizing increase in the number of shares
constituting a series of the corporation's cumulative preferred
stock, the series of Series A 10% Cumulative Preferred Stock
created by this Certificate of Designations shall be restricted to
250,000 shares in the aggregate, and no more shares of such series
shall ever be issued so long as any shares of such series shall be
outstanding.

A-18

<PAGE>

(c) So long as the Series A 10% Cumulative Preferred Stock shall be
outstanding, the corporation shall not declare or make any
Restricted Stock Payment that would, together with all other
Restricted Stock Payments declared or made in the year ending on
the date the same is declared or made, in the aggregate exceed (i)
50% of the Net Income of the corporation available for Junior
Stock dividends for the period of 12 consecutive calendar months
preceding such Restricted Stock Payment, if at the end of 12-month
period of the Junior Stock Equity of the corporation is less than
20% of Total Capitalization of the corporation (after adjustment
to reflect such Restricted Stock Payment) or (ii) 75% of such Net
Income if the Junior Stock Equity is 20% or more but less than 25%
of Total Capitalization. The foregoing restriction shall not
apply if the ratio of Junior Stock Equity of the corporation to
Total Capitalization is 25% or greater.

For the purpose of this paragraph (c), the following terms shall
have the meanings indicated:

"Junior Stock" shall mean the corporation's Common Stock and any
capital stock ranking junior to the Series A 10% Cumulative
Preferred Stock as to dividends or assets;

"Junior Stock Equity" shall mean the sum of the par value of, or
stated capital represented by, the outstanding shares of Junior
Stock of the corporation and the retained earnings, including
reservations thereof, and other paid-in capital of the
corporation, whether or not available for the payment of dividends
on the Junior Stock;

"Net Income" shall mean the net income of the corporation
determined in accordance with sound accounting practice;

"Restricted Stock Payment" shall mean any dividend or other
distribution on any Junior Stock (other than dividends payable in
shares of such Junior Stock), or the acquiring for value of any
Junior Stock (other than by exchange or use of proceeds forthwith
from the contemporaneous issuance of Junior Stock); and

"Total Capitalization" shall mean the aggregate of (i) Junior
Stock Equity, (ii) the par value of, or stated capital represented
by, the outstanding shares of the Company's Preferred Stock and
any other stock ranking prior thereto or on a parity therewith as
to dividends or assets, and the premium thereon, and (iii) the
principal amount of all outstanding indebtedness of the
corporation represented by bonds, notes and other evidences of
indebtedness maturing by their terms more than one year from the
date of issue thereof.

FIFTH: The corporation is to have perpetual existence.

SIXTH: The private property of the stockholders of the corporation shall
not be subject to the payment of corporate debts to any extent whatever.

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<PAGE>

SEVENTH: At all elections of directors of the corporation, each
stockholder having a right to vote thereupon shall be entitled to as many votes
as shall equal the number of his shares of stock then having voting rights
multiplied by the number of directors to be elected by the class of stockholders
to which he belongs, and he may cast all of such votes for a single director or
may distribute them among the number to be voted for by such class of
stockholders, or any two or more of them as he may see fit.

EIGHTH: The following additional provisions are inserted for the
management of the business and for the conduct of the affairs of the corporation
and for the creation, definition, limitation and regulation of the powers of the
corporation, the directors and stockholders:

Except as otherwise fixed by or pursuant to the provisions of Article
FOURTH of the Restated Certificate of Incorporation relating to the rights of
the holders of the Preferred Stock to elect additional directors under specified
circumstances, the number of directors which shall constitute the whole Board of
Directors shall be not less than five (5) nor more than nine (9). Within such
limits, the number of directors shall be fixed from time to time exclusively by
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board of Directors for adoption). At the special meeting of
stockholders at which this paragraph is adopted, the directors shall be divided
into three classes, designated Class I, Class II and Class III (which at all
times shall be as nearly equal in number as possible), with the term of office
of Class I directors to expire at the 1985 annual meeting of stockholders, the
term of office of Class II directors to expire at the 1986 annual meeting of
stockholders, and the term of office of Class III directors to expire at the
1987 annual meeting of stockholders. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election.

Subject to the rights of the holders of any class or series of capital
stock of the corporation entitled to vote generally in the election of directors
(hereinafter referred to as the "Voting Stock") then outstanding, any director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of at least 80%
of the voting power of all of the then outstanding shares of the Voting Stock,
voting together as a single class. Except as may otherwise be provided by law,
cause for removal shall be construed to exist only if the director whose removal
is proposed has been convicted of a felony by a court of competent jurisdiction
and such conviction is no longer subject to direct appeal, or has been adjudged
by a court of competent jurisdiction to be liable for negligence, or misconduct,
in the performance of his duty to the corporation in a matter of substantial
importance to the corporation, and such adjudication is no longer subject to
direct appeal.

Subject to the rights of the holders of any class or series of the Voting
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies on the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled by a majority vote of the directors then in
office, though less than a quorum, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to

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which they have been elected expires. No decrease in the number of authorized
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.

Notwithstanding the foregoing, whenever the holders of the Preferred Stock
shall have the right to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies, and other
features of such directorships shall be governed by the terms of this Restated
Certificate of Incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Article unless expressly
provided by such terms.

Subject to the voting rights of the Preferred Stock as in Article FOURTH
hereof provided and to any voting rights created for the benefit of any series
of Preferred Stock by any resolution or resolutions of the Board of Directors
providing for the issue of Preferred Stock adopted as authorized in said
Article, the Board of Directors shall also have power, without the assent or
vote of the stockholders, from time to time:

(1) to fix the times for the declaration and payment of dividends;

(2) to fix and vary the amount to be reserved as working capital or for any
other proper purpose or purposes;

(3) to authorize and cause to be executed mortgages and liens upon all the
property and assets of the corporation, or any part thereof, whether at
the time owned or thereafter acquired, upon such terms and conditions
as it may determine;

(4) to determine the use and disposition of any surplus or net assets in
excess of capital;

(5) to make and alter by-laws of the corporation, subject to the right of
the stockholders to make and alter by-laws of the corporation;
provided, however, that the directors shall not modify or repeal any
by-law hereafter made by the stockholders;

(6) to pay for, in cash or property, any property or rights acquired by the
corporation or to authorize the issue and exchange therefor of shares
of the capital stock of the corporation or bonds, debentures, notes or
other obligations or other securities of the corporation, whether
secured or unsecured; and

(7) to borrow or otherwise raise moneys, without limit to amount, for any
of the purposes of the corporation; to authorize the issue of bonds,
debentures, notes or other obligations of the corporation, of any
nature or in any manner, secured or unsecured, for moneys so borrowed;
to authorize the creation of mortgages upon, or the pledge or
conveyance or assignment in trust of, the whole or any part of the
property and assets of the corporation, real or personal, whether at
the time owned or thereafter acquired, including contracts, choses in
action and other rights, to secure the payment of any bonds,
debentures, or notes or other obligations of the corporation and the
interest thereon; and to authorize the sale or pledge or other
disposition of the bonds, debentures, notes or other obligations of the
corporation for its corporate purposes.

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<PAGE>

The Board of Directors shall also have power, with the consent in writing
of the holders of a majority of the stock issued and outstanding having voting
power, or upon the affirmative vote of the holders of a majority of the stock
issued and outstanding having voting power, to sell, lease, or exchange all of
the property and assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions as the Board of Directors
deems expedient and for the best interests of the corporation; subject, however,
to the voting rights of the Preferred Stock as in Article FOURTH hereof provided
and to any voting rights created for the benefit of any series of Preferred
Stock by any resolution or resolutions of the Board of Directors providing for
the issue of Preferred Stock adopted as in Article FOURTH hereof authorized.

In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the corporation, subject, nevertheless, to the provisions of the statutes of
Delaware, of the Restated Certificate of Incorporation, and amendments thereto,
and other contracts of the corporation, and by-laws.

NINTH: No stockholder shall be entitled as a matter of right to
subscribe for, purchase or receive any shares of the stock or any rights or
options of the corporation which it may issue or sell, whether out of the number
of shares authorized by this Restated Certificate of Incorporation, or by any
amendment thereof, or out of the shares of stock of the corporation acquired by
it after the issuance thereof, nor shall any stockholder be entitled as a matter
of right to purchase or subscribe for or receive any bonds, debentures, or other
obligations which the corporation may issue or sell that shall be convertible
into or exchangeable for stock or to which shall be attached or appertain any
warrant or warrants or other instrument or instruments that shall confer upon
the holder or owner of such obligations the right to subscribe for or purchase
from the corporation any shares of its capital stock. But all such additional
issues of stock, rights or options, or of bonds, debentures, or other
obligations convertible into or exchangeable for stock or to which warrants
shall be attached or appertain or which shall confer upon the holder the right
to subscribe for or purchase any shares of stock, may be issued and disposed of
by the Board of Directors to such persons and upon such terms as in its absolute
discretion it may deem advisable.

TENTH: The minimum amount of capital with which the corporation will
commence business is One Thousand and No/100 Dollars ($1,000.00).

ELEVENTH: Any action required or permitted to be taken by the
stockholders of the corporation must be effected at a duly called annual or
special meeting of stockholders of the corporation and may not be effected by
any consent in writing by such stockholders. Special meetings of stockholders
of the corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board for adoption) or by
the holders of not less than a majority of the voting power of all of the then-
outstanding shares of Voting Stock.

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<PAGE>

TWELFTH: The stockholder vote required to approve any Business
Combination (as hereinafter defined) shall be as set forth in this Article
TWELFTH.

(a) (1) Except as otherwise expressly provided in paragraph (b) of this
Article TWELFTH:

(A) any merger or consolidation of the corporation or any
subsidiary (as hereinafter defined) with (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other
corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or

(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
corporation or any subsidiary having an aggregate Fair
Market Value (as hereinafter defined) of $25,000,000 or
more; or

(C) the issuance or transfer by the corporation or any
subsidiary (in one transaction or a series of transactions)
of any securities of the corporation or any subsidiary to
any Interested Stockholder or any Affiliate of any
Interested Stockholders in exchange for cash, securities or
other property (or a combination thereof) having an
aggregate of $25,000,000 or more; or

(D) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of
any Interested Stockholder or any Affiliate of any
Interested Stockholder; or

(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the corporation, or any
merger or consolidation of the corporation with any of its
subsidiaries or any other transaction (whether or not with
or into or otherwise involving any Interested Stockholder)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any
class of equity or convertible securities of the corporation
or any subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any
Interested Stockholder;

shall require the affirmative vote of the holders of at least
80% of the voting power of all of the then-outstanding shares of
the Voting Stock, voting together as a single class (it being
understood that for purposes of this Article TWELFTH, each share
of the Voting Stock shall have the number of votes granted to it
pursuant to Article FOURTH of the Restated Certificate of
Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or in any agreement
with any national securities exchange or otherwise, and shall be
required in addition to any affirmative vote of the holders of
any particular class or series of Voting Stock required by law
or this Restated Certificate of Incorporation.

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<PAGE>

(2) The term "Business Combination" as used in this Article TWELFTH
shall mean any transaction which is referred to in any one or
more of subsections (A) through (E) of subparagraph (1) of this
section (a).

(b) The provisions of section (a) of this Article TWELFTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required
by law or any other provision of this Restated Certificate of
Incorporation, if, in the case of a Business Combination that does
not involve any cash or other consideration being received by the
stockholders of the corporation, solely in their respective
capacities as stockholders of the corporation, the condition
specified in the following subparagraph (1) is met, or, in the case
of any other Business Combination, the conditions specified in
either of the following subparagraphs (1) or (2) are met:

(1) The Business Combination shall have been approved by a majority
of the Disinterested Directors (as hereinafter defined), it
being understood that this condition shall not be capable of
satisfaction unless there is at least one Disinterested
Director.

(2) All of the following conditions shall have been met:

(A) The consideration to be received by holders of shares of a
particular class of outstanding Voting Stock shall be in
cash or in the same form as the Interested Stockholder has
paid for shares of such class of Voting Stock within the
two-year period ending on and including the date on which
the Interested Stockholder became an Interested Stockholder
(the "Determination Date"). If, within such two-year
period, the Interested Stockholder has paid for shares of
any class of Voting Stock with varying forms of
consideration, the form of consideration to be received per
share by holders of shares of such class of Voting Stock
shall be either cash or the form used to acquire the largest
number of shares of such class of Voting Stock acquired by
the Interested Stockholder within such two-year period.

(B) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the date (the "Consummation Date") of the
consummation of the Business Combination, of the
consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall
be at least equal to the higher of the following (it being
intended that the requirements of this subparagraph (2)(B)
shall be required to be met with respect to all shares of
Common Stock outstanding whether or not the Interested
Stockholder has previously acquired any shares of Common
Stock):

(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Stockholder for any shares of Common Stock acquired by
it within the two-year period immediately prior to the
date of the first public announcement of the proposal
of the Business Combination (the "Announcement Date")
or in the transaction in which it became an Interested

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<PAGE>

Stockholder, whichever is higher, plus interest
compounded annually from the Determination Date through
the Consummation Date at the prime rate of interest of
Citibank, N.A., New York, New York (or such other bank
as may be selected by the Disinterested Directors), in
effect from time to time, less the aggregate amount of
any cash dividends paid, and the Fair Market Value of
any dividends paid in other than cash, on each share of
Common Stock from the Determination Date through the
Consummation Date, in an amount up to but not exceeding
the amount of interest so payable per share of Common
Stock; or

(ii) the Fair Market Value per share of Common Stock on the
Announcement Date.

(C) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the Consummation Date, of the consideration
other than cash to be received per share by holders of
shares of any class, other than Common Stock, of outstanding
Voting Stock shall be at least equal to the highest of the
following (it being intended that the requirements of this
subparagraph (2)(C) shall be required to be met with respect
to every such class of outstanding Voting Stock, whether or
not the Interested Stockholder has previously acquired any
shares of a particular class of Voting Stock);

(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Stockholder for any shares of such class of Voting
Stock acquired by it within the two-year period
immediately prior to the Announcement Date or in the
transaction in which it became an Interested
Stockholder, whichever is higher, plus interest
compounded annually from the Determination Date through
the Consummation Date at the prime rate of interest of
Citibank, N.A., New York, New York (or such other bank
as may be selected by the Disinterested Directors), in
effect from time to time, less the aggregate amount of
any cash dividends paid, and the Fair Market Value of
any dividends paid in other than cash, on each share of
such class of Voting Stock from the Determination Date
through the Consummation Date in an amount up to but
not exceeding the amount of interest so payable per
share of such class of Voting Stock; or

(ii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date; or

(iii)the highest preferential amount per share to which the
holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the
corporation.

(D) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (x) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular

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<PAGE>

date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding Preferred Stock; (y) there
shall have been (i) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as
approved by a majority of the Disinterested Directors, and
(ii) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or
any similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the
failure so to increase such annual rate is approved by a
majority of Disinterested Directors; and (z) such Interested
Stockholder shall have not become the beneficial owner of
any additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder
becoming an Interested Stockholder.

(E) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have
received the benefit, directly or indirectly (except
proportionately as a stockholder of the corporation), of any
loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the corporation, whether in anticipation of or
in connection with such Business Combination or otherwise.

(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
all stockholders of the corporation at least 30 days prior
to the consummation of such Business Combination (whether or
not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).

(1) A "person" shall mean any individual, firm, corporation or other
entity.

(2) "Interested Stockholder" shall mean any person (other than the
corporation or any Subsidiary) who or which:

(A) is the beneficial owner, directly or indirectly, of more
than 10% of the voting power of the outstanding Voting
Stock; or

(B) is an Affiliate of the corporation and at any time within
the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the then-outstanding
Voting Stock; or

(C) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year
period immediately prior to the date in question
beneficially owned by an Interested Stockholder, if such
assignment or succession shall have occurred

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<PAGE>

in the course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1933, as amended.

(3) A person shall be a "beneficial owner" of any Voting Stock:

(A) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or
indirectly; or

(B) which such person or any of its Affiliates or Associates has
(x) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (y) the right to vote pursuant to
any agreement, arrangement or understanding; or

(C) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock.

(4) For the purposes of determining whether a person is an
Interested Stockholder pursuant to subparagraph (2) of this
paragraph (c), the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through
application of subparagraph (3) of this paragraph (c), but shall
not include any other shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement, or
understanding, or upon exercise of conversion rights, warrants
or options, or otherwise.

(5) "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in
effect on October 1, 1984.

(6) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by
the corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in subparagraph
(2) of this paragraph (c), the term "subsidiary" shall mean only
a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the corporation.

(7) "Disinterested Director" means any member of the Board of
Directors of the corporation (the "Board") who is unaffiliated
with the Interested Stockholder and was a member of the Board
prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Disinterested
Director who is unaffiliated with the Interested Stockholder and
is recommended to succeed a Disinterested Director by a majority
of Disinterested Directors then on the Board.

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(8) "Fair Market Value" means: (x) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any
such exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in
use, or, if no such quotations are available, the Fair Market
Value on the date in question of a share of such stock as
determined by the Board in good faith; and (y) in the case of
property other than cash or stock, the Fair Market Value of such
property on the date in question as determined by the Board in
good faith.

(9) In the event of any Business Combination in which the
corporation survives, the phrase "consideration other than cash
to be received" as used in subparagraphs (2)(A) and (2)(C) of
paragraph (b) of this Article TWELFTH shall include the shares
of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.

(i) A majority of the total number of Disinterested Directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any such determination
as is hereinafter in this paragraph (d) specified is to be
made by the Board) shall have the power and duty to
determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine
compliance with this Article TWELFTH, including, without
limitation, (1) whether a person is an Interested
Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the
applicable conditions set forth in subparagraph (2) of
paragraph (b) have been met with respect to any Business
Combination, and (5) whether the assets which are the
subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the corporation or any subsidiary in any
Business Combination has, an aggregate Fair Market Value of
$25,000,000 or more.

(d) Nothing contained in this Article TWELFTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.

THIRTEENTH: Notwithstanding any other provisions of this Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by law or
this Restated Certificate of Incorporation, the affirmative vote of the holders
of at least 80% of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend, repeal, or adopt any provision inconsistent with, the second through
fifth paragraphs of Article EIGHTH, or Article ELEVENTH, Article TWELFTH, or
this Article THIRTEENTH.

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<PAGE>

FOURTEENTH: To the fullest extent permitted by the Delaware General
Corporation Law, as it now exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this section by the stockholders of the corporation shall be
prospective only and shall not adversely affect any limitation on the personal
liability of a director of the corporation existing at the time of such repeal
or modification.

This Restated Certificate of Incorporation was duly adopted by the Board of
Directors in accordance with Section 245 of the General Corporation Law of the
State of Delaware.

IN WITNESS WHEREOF, said Southern Union Company has, on this 2nd day of
July, 1992, caused this Certificate to be signed by Peter H. Kelley, its
President, and attested by Dennis K. Morgan, its Secretary, and the corporate
seal of said Southern Union Company to be affixed to this Certificate by the
said Dennis K. Morgan.

SOUTHERN UNION COMPANY
(Corporate Seal)

By: _____________________________
Peter H. Kelley
President

ATTEST:

By: __________________________
Dennis K. Morgan
Secretary

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<PAGE>

STATE OF TEXAS )
) ss:
COUNTY OF TRAVIS)

On this _____ day of July, 1992, personally appeared before me, the
undersigned, a Notary Public in and for said County, Peter H. Kelley, known to
me to be the President of Southern Union Company, a Delaware corporation, who
acknowledged that he signed this Restated Certificate of Incorporation (the
"Certificate") as such officer for and on behalf of Southern Union Company, that
his signing the Certificate was his free act and deed as such officer and was
the free act and deed of Southern Union Company, and that the facts stated in
the Certificate are true.

IN WITNESS WHEREOF, I have hereunto set my hand and seal at Austin, Texas
this _____ day of July, 1992.

(Notarial Seal)

___________________________________________
Notary Public in and for the State of Texas

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<PAGE>

SOUTHERN UNION COMPANY

RELEVANT SECTIONS OF THE BY-LAWS (AS CURRENTLY IN EFFECT)

ARTICLE I - STOCKHOLDERS

Section 2. SPECIAL MEETINGS. Special meetings of stockholders of the
Company may be called only by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exists any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption) or by the
holders of not less than a majority of the voting power of all of the
then-outstanding shares of any class or series of capital stock of the Company
entitled to vote generally in the election of directors. Any such special
meeting shall be held at such time and such place, either within or without the
State of Delaware, as designated in the call of such meeting. The business to
be transacted at any such meeting shall be limited to that stated in the call
and notice thereof.

ARTICLE II - DIRECTORS

Section 2. NUMBER AND TERM OF OFFICE. Except as otherwise fixed by or
pursuant to the provisions of Article FOURTH of the Company's Restated
Certificate of Incorporation relating to the rights of the holders of the
Company's Preferred Stock to elect additional directors under specified
circumstances, the number of directors which shall constitute the whole Board of
Directors shall be not less than five (5) nor more than nine (9). Within such
limits, the number of directors shall be fixed from time to time exclusively by
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exists any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board of Directors for adoption). Any decrease in the
authorized number of directors shall not become effective until the expiration
of the term of the directors whose directorships are being eliminated (as
determined by the Board of Directors) unless, at the time of such decrease,
there shall be vacancies on the Board of Directors which are being eliminated by
the decrease. The Board of Directors shall be divided into three (3) classes
serving for those initial terms as provided in Article EIGHTH of the Company's
Restated Certificate of Incorporation. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders. Notwithstanding
any provision of this Section 2 or Section 3 below, whenever the holders of the
Company's Preferred Stock shall have the right to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies, and other features of directorships shall be governed by the terms of
the Company's Restated Certificate of Incorporation applicable thereto.

<PAGE>

-2-

resignation, retirement, disqualification, removal from office or other cause
may be filled by a majority vote of the directors then in office, though less
than a quorum, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which they have been elected expires. No decrease in the number of authorized
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.

Section 15. EVALUATION OF BUSINESS COMBINATIONS. The Board of Directors
of the Company, when evaluating any offer of another party to make a tender or
exchange offer for any equity security of the Company or to otherwise effect a
Business Combination (as defined in Article TWELFTH of the Company's Restated
Certificate of Incorporation), shall, in connection with the exercise of its
judgment as to what is in the best interests of the Company as a whole, be
authorized to give due consideration to such factors as the Board of Directors
determines to be relevant, including, without limitation:

(i) the interests of the Company's stockholders;

(ii) whether the proposed transaction violates federal or state law;

(iii) an analysis of not only the consideration being offered in the
proposed transaction, in relation to the then-current market
price for the outstanding capital stock of the Company, but also
in relation to the market for the capital stock of the Company
over a period of years, the estimated price which might be
achieved in a negotiated sale of the Company as a whole or in
part or through orderly liquidation, the premiums over market
price for the securities of other corporations in other similar
transactions, current political, economic and other factors
bearing on securities prices and the Company's financial
condition and future prospects; and

(iv) the social, legal and economic effects upon employees, suppliers,
customers and others having similar relationships with the
Company and the communities in which the Company conducts it
business.

In connection with any such evaluation, the Board of Directors is
authorized to conduct its investigation and to engage in such legal proceedings
as the Board of Directors may determine.

<PAGE>

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ARTICLE X - MISCELLANEOUS PROVISIONS

Section 8. AMENDMENT OF BY-LAWS. The Stockholders, by the affirmative
vote of the holders of a majority of the voting power of the then-outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class, or the Board of Directors, by the affirmative vote
of a majority of the directors, may at any meeting, if the substance of the
proposed amendment shall have been stated in the notice of meeting, amend, alter
or repeal any of these By-Laws. Notwithstanding the foregoing, the affirmative
vote of the holders of at least eighty percent (80%) of the voting power of all
of the then-outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend or repeal, or adopt any provision inconsistent with, Section 2 of
Article I, Section 2 of Article II, Section 3 of Article II, or the second
through the fifth paragraphs of Article EIGHTH, or Article ELEVENTH, Article
TWELFTH, or Article THIRTEENTH of the Company's Restated Certificate of
Incorporation of this sentence.

<PAGE>

APPENDIX B

[CONFORMED COPY]

PROPOSED

RESTATED CERTIFICATE OF INCORPORATION

SOUTHERN UNION COMPANY

Southern Union Company
Austin, Texas

<PAGE>
PROPOSED RESTATED CERTIFICATE OF INCORPORATION

SOUTHERN UNION COMPANY, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:

1. The name of the corporation is Southern Union Company and the name
under which the corporation was originally incorporated is Southern
Union Utilities Company.

The date of filing its original Certificate of Incorporation with the
Secretary of State was December 13, 1932.

2. This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the Delaware
General Corporation law.

FIRST: The name of the corporation is Southern Union Company.

THIRD: The nature of the business of the corporation or objects or
purposes to be transacted, promoted or carried on by it are:

(a) To mine for, prospect for, drill for, produce, store, refine, buy or
in any manner acquire, convert or manufacture into its several
products, and to market, sell, transport, and distribute natural gas,
manufactured gas, artificial gas and/or liquefied petroleum gas, and
any mixture or combination of any such gases, and any derivatives or
products or residual products or manufactured products of such gases
or any of them; to mine for, prospect for, drill for, produce, buy or
in any manner acquire, refine, convert or manufacture into its
several products, and to sell, market, distribute and transport
petroleum and its derivatives, products and by-products and to
construct, lay, purchase or in any manner acquire, and to own, hold,
maintain and operate, and to sell, exchange, lease, encumber or in
any manner dispose of works, buildings, pipe lines, mains,
distribution systems, machinery, appliances, apparatus, facilities,
rights, privileges, franchises, ordinances and all such real and
personal property as may be necessary, useful or convenient in the
production, acquisition, sale, storage, combustion, refining,
manufacturing, conversion, transportation and marketing of natural
gas, manufactured gas, artificial gas, liquefied petroleum gas and
petroleum, or any of them, and the derivatives, products or by-
products thereof, however derived;

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(b) To acquire, by purchase or otherwise, construct, lease, let, own,
hold, sell, convey, equip, maintain, operate and otherwise deal in
and with pipe lines, cars, vessels, tanks, tramways, refineries,
reduction plants, land and interests in land and any and all other
properties, conveyances, appliances, and apparatus for storing,
transporting, distributing, marketing, converting, manufacturing,
distilling, refining, reducing, preparing, or otherwise dealing in
and with petroleum, gas, gasoline, liquefied petroleum gases,
asphaltum, and any and all other minerals, metals and ores, and the
derivatives, products and by-products thereof, however derived;

(c) To carry on the general business of an electric light, heat and power
company in all of its branches and to generate, buy or in any manner
acquire, accumulate, distribute, market and supply electric current,
light, heat and power to cities, towns, streets, buildings and
places, both public and private, and to any consumer of electric
energy for any purpose, and to construct, lay down, establish, fix,
and to carry on the business of electrical and mechanical engineers,
suppliers of electricity for the purpose of light, heat and power or
otherwise; to manufacture or deal in things required for or capable
of being used in connection with the generation, distribution,
accumulation, sale, improvement and/or consumption of electricity;

(d) To carry on the business of telephone, telegraph and/or cable
company, and to establish, work, control, regulate, manage, maintain
and operate telephone lines and exchanges and to transmit and
facilitate the transmission of telephone, telegraph and/or cable
communications and messages; to construct, equip, maintain, operate,
lease and sell telephone, telegraph and cable lines and systems and
all kinds of works, machinery, apparatus, conveniences and things
capable of being used in connection with any of these objects;

(e) To purchase, lease, or otherwise acquire, build, construct, erect,
hold, own, improve, enlarge, maintain, operate, control, supervise,
and manage, and to sell, lease, or otherwise dispose of water and
waterworks for the purpose of supplying municipalities, corporations,
and individuals with water for public, corporate, business,
irrigation, or domestic use; to construct, purchase, lease or
otherwise acquire, maintain, and operate dams, reservoirs, settling
basins, irrigation systems, pumping stations, water towers,
buildings, plants, machinery, distribution systems, mains, pipes,
conduits, aqueducts, meters, and all other necessary apparatus,
appliances, rights, permits and property used or useful or convenient
for use in the acquisition, distribution, measurement, and sale of
water;

(f) To manufacture ice and to buy, sell and generally deal in artificial
and/or natural ice both at wholesale and retail, to purchase or
otherwise acquire and to sell or otherwise dispose of and maintain
and operate ice manufacturing plants of all kinds and descriptions;
to carry on and conduct the business of storage, cold storage,
warehousing, refrigeration, freezing and all business necessarily or
impliedly incidental thereto;

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<PAGE>

services to municipalities, corporations, and individuals; and to own
and acquire all necessary apparatus, appliances, rights, permits and
property used or useful or convenient for use in connection therewith;

(h) To acquire, own, construct, erect, lay down, manage, maintain,
operate, enlarge, alter, work and use all such lands and interests in
land, buildings, easements, gas, electric and other works, machinery,
plant, stock, pipes, lamps, meters, fittings, motors, apparatus,
appliances, materials and things, and to supply all such materials,
products and things as may be necessary, incident or convenient in
connection with the production, use, storage, manufacture,
combustion, conversion, regulation, purification, measurement, supply
and distribution of any of the products of the corporation;

(i) To carry on and conduct a general utility management, servicing,
operating, engineering and contracting business; to appraise, value,
design, build, construct, enlarge, develop, improve, extend and
repair light, heat, power, transmission and hydraulic plants,
electrical works, machinery and appliances, telegraph and telephone
lines, dams, reservoirs, canals, bridges, piers, docks, mines,
shafts, tunnels, wells, water works, street railways, interurban
railways, railways and buildings;

(j) To engage in and conduct any one or more or all of the businesses
classed as public utilities, particularly including but not limited
to the businesses of supplying any one or more of the following, for
employment in any manner for which the same may be employed, to wit:
power and energy, in the form of electric current, as well as in
every other form; heating from steam, hot water or otherwise; natural
gas, manufactured gas, artificial gas and/or liquefied petroleum gas,
ice, water, sewer, sewage disposal, telephone, telegraph or cable
service, cold storage and warehousing;

(k) To obtain the grant of, purchase, lease, or otherwise acquire any
concessions, rights, options, patents, privileges, lands and
interests therein, rights of way, sites, properties, undertakings or
businesses, or any right, option or contract in relation thereto, and
to perform, carry out and fulfill the terms and conditions thereof,
and to carry the same into effect and to develop, maintain, lease,
sell, transfer, dispose of and otherwise deal in and with the same;

(l) To subscribe for, or cause to be subscribed for, buy, own, hold,
purchase, receive, or acquire, and to sell, negotiate, guarantee,
assign, deal in, exchange, transfer, mortgage, pledge or otherwise
dispose of, shares of the capital stock, scrip, bonds, coupons,
mortgages, debentures, debenture stock, securities, notes,
acceptances, drafts and evidences of indebtedness issued or created
by other corporations, joint stock companies or associations, whether
public, private or municipal, or by any corporate or unincorporated
body, or by any government or governmental subdivision or agency, and
while the owner thereof, to possess and to exercise in respect
thereof all the rights, powers and privileges of ownership, including
the right to vote thereon; to guarantee the payment of dividends on
any shares of the capital stock of any of the corporations, joint
stock companies or associations in which the corporation has or may
at any time have an interest, direct or indirect, and to become
surety in respect of, endorse, or otherwise guarantee the payment of
the principal of or interest on any scrip, bonds, coupons, mortgages,
debentures, debenture stock, securities, notes, drafts, bills of

B-3

<PAGE>

exchange or evidence of indebtedness, issued or created by any such
corporations, joint stock companies or associations; to become surety
for or guarantee the carrying out and performance of any and all
contracts, leases, and obligations of every kind of any corporations,
joint stock companies, or associations and in particular of any
corporation, joint stock company or association any of whose shares,
scrip, bonds, coupons, mortgages, debentures, debenture stock,
securities, notes, drafts, bills of exchange or evidence of
indebtedness, are at any time held by or for the corporation, and to
do any acts or things designed to protect, preserve, improve or
enhance the value of any such shares, scrip, bonds, coupons,
mortgages, debentures, debenture stock, securities, notes, drafts,
bills of exchange or evidences of indebtedness;

(m) To organize, incorporate, reorganize, finance, and to aid and assist,
financially or otherwise, companies, corporations, joint stock
companies, syndicates, partnerships and associations of all kinds,
and to underwrite, subscribe for and endorse the bonds, stocks,
securities, debentures, notes or undertakings of any such company,
corporation, joint stock company, syndicate, partnership or asso-
ciation, and to make any guarantee in connection therewith or
otherwise for the payment of money or for the performance of any
obligation or undertaking, and to do any and all things necessary or
convenient to carry any of such purposes into effect; to buy, sell
and otherwise deal in notes, open accounts and other similar
evidences of debt, and to loan money and to take notes, open accounts
and other similar evidences of debt as collateral security therefor
and to charge any lawful rate of interest in connection therewith;

(n) To improve, manage, develop, sell, assign, transfer, lease, mortgage,
pledge, or otherwise dispose of or turn to account or deal with all
or any part of the property of the corporation, and from time to time
to vary any investment or employment of capital of the corporation;

(o) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether
secured by mortgage, pledge, or otherwise, without limit as to
amount, and to secure the same by mortgage, pledge or otherwise; and
generally to make and perform agreements and contracts of every kind
and description;

(p) To manufacture, buy, sell, deal in and to engage in, conduct and
carry on the business of manufacturing, buying, selling, and dealing
in goods, wares, and merchandise of every class and description;

(q) To the same extent as natural persons might or could do, to purchase
or otherwise acquire, and to hold, own, maintain, work, develop,
sell, lease, exchange, hire, convey, mortgage or otherwise dispose of
and deal in, lands and leaseholds, and any interest, estate and
rights in real property, and any personal or mixed property, and any
franchises, rights, licenses or privileges necessary, convenient or
appropriate for any of the purposes herein expressed;

B-4

<PAGE>

patent rights, letters patent of the United States or of any other
country or government, inventions, improvements and processes, whether
used in connection with or secured under letters patent or otherwise;

(s) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the
objects or the furtherance of any of the powers hereinbefore set
forth, either along or in association with other corporations, firms
or corporations, firms or individuals, and to do every other act or
acts, thing or things, incidental or appurtenant to or growing out of
or connected with the aforesaid business or powers or any part or
parts thereof, provided the same to be not inconsistent with the laws
under which the corporation is organized;

(t) The business or purpose of the corporation is from time to time to do
any one or more of the acts and things hereinabove set forth, and it
shall have power to conduct and carry on its said business, or any
part thereof, and to have one or more offices, and to exercise all or
any of its corporate powers and rights, in the State of Delaware, and
in any one or more of the various other states, territories,
colonies, dependencies of the United States, in the District of
Columbia, and in all or any foreign countries.

B-5

<PAGE>

providing for the issue of such stock adopted by the Board of Directors
pursuant to authority hereby vested in it, each series to be
appropriately designated, prior to the issue of any shares thereof, by
some distinguishing rate of dividend, number, letter or title. All
shares of each series of Preferred Stock shall be alike in every
particular (except as to the date from which dividends shall commence
to accrue) and all shares of Preferred Stock shall be of equal rank and
have the same powers, preferences, and rights and shall be subject to
the same qualifications, limitations and restrictions, without
distinction between the shares of different series thereof, except only
in regard to the following particulars, which may be different in the
different series:

(a) the amount or amounts payable, together with accrued dividends to the
date of distribution as hereinafter provided, to holders thereof upon
any involuntary liquidation, dissolution or winding-up of the
corporation (such amount or amounts, exclusive of such accrued
dividends, being hereinafter referred to as the "Stated Value" of the
shares in question), provided, however, that the aggregate Stated
Value of all shares of Preferred Stock at any time outstanding shall
not exceed $60,000,000;

(b) the annual rate or rates of dividends payable on shares of such
series and the dates from which such dividends shall commence to
accrue;

(c) the amount or amounts payable upon redemption thereof and, subject to
applicable provisions of the Restated Certificate of Incorporation,
as amended, the manner of effecting such redemption;

(d) the preferential amount or amounts payable to holders thereof upon
any voluntary liquidation, dissolution or winding-up of the
corporation;

(e) the provisions of any sinking, purchase and/or analogous funds, if
any, with respect thereto (including provisions, if any, with respect
thereto requiring the corporation to set aside funds with which to
purchase and acquire shares thereof, or to attempt to purchase and
acquire shares thereof, at prices not exceeding the redemption price
from time to time applicable);

(f) the terms and rates of conversion and/or exchange thereof, if
convertible and/or exchangeable;

(h) the provisions, if any, for reimbursement by the corporation to the
holders of shares of one or more series, of the amount of certain
taxes paid by them, to the extent it can do so from funds which at
the time might be properly applied (under the laws of the State of
Delaware and under the provisions of the Restated Certificate of
Incorporation, as amended, and under resolutions of the Board of
Directors adopted as herein authorized) to the payment of dividends
on shares of the corporation ranking junior to the Preferred Stock as
to dividends.

B-6

<PAGE>

(a) from such date, if any, as may be fixed by the Board of Directors
prior to the issue thereof;

(b) if no such date is fixed and if such shares shall be issued in the
period following a dividend record date fixed for the series of which
it is a part and up to and including the dividend payment date for
which such record was taken, then from such dividend payment date; or

(c) otherwise from the dividend payment date next preceding the date of
issue of such share, or if such share shall be issued on a dividend
payment date, from such dividend payment date.

The corporation in making any dividend payment upon the Preferred Stock shall
make dividend payments ratably upon all outstanding shares of Preferred Stock in
proportion to the amount of the dividends accrued thereon to the date of such
dividend payment. Accumulations of dividends shall not bear interest.

B-7

<PAGE>

(other than the net proceeds received from the sale of stock ranking junior to
the Preferred Stock as to dividends and assets) be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of shares of
Common Stock or of any other class of stock ranking junior to the Preferred
Stock as to dividends or assets, unless:

(a) all dividends on all outstanding shares of Preferred Stock of all
series for all past dividend periods shall have been paid and the
full dividend on all outstanding shares of Preferred Stock of all
series for the then current quarterly dividend period shall have been
paid or declared and set apart for payment; and

(b) the corporation shall have set aside all amounts, if any, theretofore
required to be set aside as and for sinking, purchase and/or
analogous funds, if any, for the Preferred Stock of all series.

B-8

<PAGE>

Illinois, having a combined capital and surplus of not less than
$2,000,000 selected by the Board of Directors for that purpose, to be
applied to such redemption, then from and after the making of such
deposit such shares shall not be deemed to be outstanding for any
purpose and the rights of the holders of certificates issued to
represent such shares shall be limited to the right to receive payment
of the redemption price (without interest) from the depository upon
endorsement, if required, and surrender of said certificates; provided,
however, that no then existing right of conversion or exchange, if any,
with respect to such shares shall be impaired by such deposit. Any
moneys so deposited which shall not be required for such redemption
because of the exercise of any such right of conversion or exchange
subsequent to the date of such deposit and prior to the expiration of
such right shall be returned to the corporation forthwith. The
corporation shall be entitled to receive, from time to time, from the
depository the interest, if any, allowed on such moneys deposited with
it, and the holders of certificates issued to represent any shares so
redeemed shall have no claim to any such interest. Any moneys so
deposited and remaining unclaimed at the end of six (6) years from the
redemption date shall, if thereafter requested by resolution of the
Board of Directors, be repaid to the corporation, and in the event of
such repayment to the corporation, such holders of certificates issued
to represent the shares so called for redemption as shall not have made
claim against such moneys prior to such repayment to the corporation
shall be deemed to be unsecured creditors of the corporation for an
amount equivalent to the amount deposited as the redemption price of
such shares and so repaid to the corporation, but shall in no event be
entitled to any interest.

The corporation shall not at any time redeem, or purchase or otherwise
acquire less than all of the shares of Preferred Stock at the time
outstanding, unless full dividends with respect to all past dividend
periods and for the current dividend period have been paid or declared
and set apart for payment on all shares of the Preferred Stock then
outstanding and not then to be redeemed, purchased or otherwise acquired
by the corporation; provided, however, if the corporation has paid or
declared and set apart for payment full dividends with respect to all
past dividend periods on such shares, it shall not be required to pay or
declare and set apart for payment dividends on such shares for any
current dividend period during which it may redeem, purchase or
otherwise acquire shares of Preferred Stock of any series, at prices not
exceeding the redemption price then applicable to such series, in
pursuance of any sinking, purchase and/or analogous fund for shares of
such series.

Shares of Preferred Stock of any particular series may also be subject
to redemption through operation of any sinking or analogous fund created
for such series, at the prices and under the terms and provisions fixed
for such fund by the Board of Directors as herein authorized.

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Provided, however, that if and whenever dividends on the Preferred
Stock shall be in arrears and such arrearages shall aggregate an amount
equal to at least six (6) quarterly dividends thereon, the Preferred
Stock shall have the right, voting as a class, to elect two members of
the Board of Directors of the corporation, and such right shall
continue and be exercisable at each election of directors of the
corporation until all arrearages in dividends on the Preferred Stock
shall have been paid in full to holders of the Preferred Stock and the
current quarterly dividend thereon for the current quarterly dividend
period shall have been declared and set apart for payment, and
thereupon all voting rights given by this proviso shall be divested
from the Preferred Stock (subject, however to being at any time or from
time to time similarly revived and divested). At any time after the
holders of the Preferred Stock shall have thus become entitled to elect
two members of the Board of Directors of the corporation, the Secretary
of the corporation may, and upon the written request of holders of
record of at least 10% in Stated Value of the Preferred Stock then out-
standing addressed to him at the statutory office of the corporation in
Delaware shall, call a special meeting of the holders of the Preferred
Stock for the purpose of electing such two directors, to be held,
within forty days of the receipt of such request, at the principal
business office of the corporation, upon the notice then provided by
law and the by-laws for the holding of special meetings of
stockholders; provided, however, that the Secretary need not call any
such special meeting at the request of such holders of Preferred Stock
if a regular meeting of stockholders for the election of directors is
to convene within ninety days after receipt by the Secretary of such
request. If such special meeting is required to be called by the
foregoing

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provisions but is not called by the Secretary within twenty days after
receipt of such request, then the holders of record of 10% or more in
Stated Value of the Preferred Stock then outstanding may designate in
writing one of their number to call such meeting at the place and upon
the notice above provided, and any person so designated shall have
access to the stock books of the corporation for such purpose. At any
such special meeting or at any regular meeting for the election of
directors at which the holders of Preferred Stock shall be entitled to
elect two directors as aforesaid, the holders of a majority in Stated
Value of the then outstanding shares of Preferred Stock present in
person or by proxy shall be sufficient to constitute a quorum for the
election of such two directors, which shall be elected by vote of
holders of Preferred Stock having a plurality in Stated Value. The
persons so elected by holders of the Preferred Stock as directors,
together with the directors elected by the Common Stock or any other
class or classes of stock having voting rights for the election of
directors, shall constitute the Board of Directors of the corporation.
Concurrently with the first election of two (2) directors by holders of
the Preferred Stock after any vesting of the voting right hereinabove
provided for, the number of directors constituting the Board shall be
increased by two (2), and concurrently with the divestment of such
right, as aforesaid, the number of such directors shall be reduced by
two (2) and any person theretofore elected pursuant to such right shall
automatically cease to be a member of the Board of Directors. Holders
of the Preferred Stock shall be entitled at any election of directors
where they are authorized to vote, whether a special election called
for their benefit or a regular election, to exercise with respect to
the two directors to be elected by such holders cumulative voting
rights, if and to the extent that cumulative voting rights are provided
for all stockholders of the corporation elsewhere in the Restated
Certificate of Incorporation, as amended.

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(b) amend, alter or repeal any of the rights, preferences or powers of
the outstanding Preferred Stock stated and expressed in the
Certificate of Incorporation, as amended, or in the resolution or
resolutions of the Board of Directors, adopted as herein
authorized, so as adversely to affect the rights, preferences or
powers of the Preferred Stock or its holders; provided, however,
that if any such amendment, alteration or repeal would adversely
affect the rights, preferences or powers of outstanding shares of
Preferred Stock of any particular series (one or more) without
correspondingly affecting the rights, preferences or powers of the
outstanding shares of all series, then a like vote or consent by
the holders of at least 66-2/3% in Stated Value of the Preferred
Stock of the affected series (one or more) at the time outstanding
shall also be necessary for effecting or validating any such
amendment, alteration or repeal;

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(c) sell, lease, or convey all, or substantially all, of its property
or business; or voluntarily liquidate, dissolve or wind up its
business;

(d) effect the merger or consolidation of the corporation into or with
any other corporation, or the merger of any other corporation into
the corporation, unless the corporation resulting from or surviving
such merger or consolidation will upon consummation of such merger
or consolidation have no class of stock and no other securities,
either authorized or outstanding, ranking prior to or on a parity
with the Preferred Stock, except the same number of shares (or
aggregate par value or Stated Value) of stock and the same
principal amount of other securities with the same rights and
preferences as the stock and other securities of the corporation
respectively authorized and outstanding immediately preceding such
merger or consolidation and unless each holder of the Preferred
Stock immediately preceding such merger or consolidation shall
receive or retain the same number of shares (or aggregate par value
or Stated Value) of stock with the same rights and preferences of
the resulting or surviving corporation.

(8) So long as any shares of Preferred Stock are outstanding, the
corporation shall not, without the affirmative vote at a meeting (the
notice of which shall state the general character of the matters to be
submitted thereat) or the written consent with or without a meeting, of
the holders of at least a majority in Stated Value of the then-
outstanding shares of Preferred Stock, increase the authorized amount
of Preferred Stock, or decrease the authorized amount of Preferred
Stock.

(9) Subject to all of the rights of the Preferred Stock, dividends may be
paid upon the Common Stock as and when declared by the Board of
Directors.

(10) Dividends upon the stock of the corporation of any class shall be
payable only out of assets, profits or funds of the corporation at the
time legally available therefor, and only when and as declared by the
Board of Directors. The Board of Directors shall have power to
determine whether any, and, if any, what part of such available assets,
profits or funds shall be declared as dividends and paid to its
stockholders; and all rights of holders of stock of the corporation of
any class in respect of dividends shall be subject to the power of the
Board of Directors so to do.

(11) The following terms, wherever used in this Article FOURTH, or in any
resolution or resolutions heretofore or hereafter adopted by the Board
of Directors as herein authorized, shall be deemed to have the
following meanings.

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"Board of Directors", when not otherwise specified, shall mean the
Board of Directors of Southern Union Company at the time elected and
acting.

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of the corporation or of a consolidated subsidiary shall have been
acquired by it during any period for which such determination is made
or shall be so acquired before or contemporaneously with the issuance
of additional stock then proposed to be issued, the net income from
such property during the period, or such part thereof as shall have
preceded acquisition by the corporation or its consolidated subsidiary,
as the case may be, to the extent not otherwise included, shall be
included as a part of the consolidated net income of the corporation
and its consolidated subsidiaries computed in the same manner as
specified above except that federal taxes with respect to income from
such property shall be adjusted as if such property had been owned by
the corporation or its consolidated subsidiary during the entire period
in question, and (3) if within such period or prior to or
contemporaneously with the issuance of the additional stock, the
corporation or a consolidated subsidiary shall have disposed of any
property, voluntarily or through exercise of eminent domain or
otherwise, then the net income (estimated, if necessary) from such
property for the whole of the period in question shall be excluded from
the consolidated net income of the corporation and its consolidated
subsidiaries in such computation and federal taxes with respect to
income shall be adjusted in making such computation as if such property
had been disposed of prior to the period in question.

"Funded debt" shall mean indebtedness which by its terms matures more
than one year from the date of its creation.

FIFTH: The corporation is to have perpetual existence.

SIXTH: The private property of the stockholders of the corporation shall
not be subject to the payment of corporate debts to any extent whatever.

B-15

<PAGE>

to expire at the 1985 annual meeting of stockholders, the term of office of
Class II directors to expire at the 1986 annual meeting of stockholders, and the
term of office of Class III directors to expire at the 1987 annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.

Subject to the rights of the holders of any class or series of capital stock
of the corporation entitled to vote generally in the election of directors
(hereinafter referred to as the "Voting Stock") then outstanding, any director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of a majority of
the voting power of all of the then outstanding shares of the Voting Stock,
voting together as a single class. Except as may otherwise be provided by law,
cause for removal shall be construed to exist only if the director whose removal
is proposed has been convicted of a felony by a court of competent jurisdiction
and such conviction is no longer subject to direct appeal, or has been adjudged
by a court of competent jurisdiction to be liable for negligence, or misconduct,
in the performance of his duty to the corporation in a matter of substantial
importance to the corporation, and such adjudication is no longer subject to
direct appeal.

Notwithstanding the foregoing, whenever the holders of the Preferred Stock
shall have the right to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies, and other fea-
tures of such directorships shall be governed by the terms of this Restated
Certificate of Incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Article unless expressly pro-
vided by such terms.

(1) to fix the times for the declaration and payment of dividends;

(2) to fix and vary the amount to be reserved as working capital or for any
other proper purpose or purposes;

B-16

<PAGE>

(4) to determine the use and disposition of any surplus or net assets in
excess of capital;

The Board of Directors shall also have power, with the consent in writing of
the holders of a majority of the stock issued and outstanding having voting
power, or upon the affirmative vote of the holders of a majority of the stock
issued and outstanding having voting power, to sell, lease, or exchange all of
the property and assets of the corporation, including its good will and its
corporate franchises, upon such terms and conditions as the Board of Directors
deems expedient and for the best interests of the corporation; subject, however,
to the voting rights of the Preferred Stock as in Article FOURTH hereof provided
and to any voting rights created for the benefit of any series of Preferred
Stock by any resolution or resolutions of the Board of Directors providing for
the issue of Preferred Stock adopted as in Article FOURTH hereof authorized.

B-17

<PAGE>

additional issues of stock, rights or options, or of bonds, debentures, or other
obligations convertible into or exchangeable for stock or to which warrants
shall be attached or appertain or which shall confer upon the holder the right
to subscribe for or purchase any shares of stock, may be issued and disposed of
by the Board of Directors to such persons and upon such terms as in its absolute
discretion it may deem advisable.

TENTH: The minimum amount of capital with which the corporation will
commence business is One Thousand and No/100 Dollars ($1,000.00).

ELEVENTH: Any action required or permitted to be taken by the stockholders
of the corporation must be effected at a duly called annual or special meeting
of stockholders of the corporation and may not be effected by any consent in
writing by such stockholders. Special meetings of stockholders of the
corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board for adoption) or by
the holders of not less than a majority of the voting power of all of the then-
outstanding shares of Voting Stock.

TWELFTH: To the fullest extent permitted by the Delaware General
Corporation Law, as it now exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this section by the stockholders of the corporation shall be
prospective only and shall not adversely affect any limitation on the personal
liability of a director of the corporation existing at the time of such repeal
or modification.

This Restated Certificate of Incorporation was duly adopted by the Board of
Directors in accordance with Section 245 of the General Corporation Law of the
State of Delaware.

IN WITNESS WHEREOF, said Southern Union Company has, on this ____ day of May,
1994, caused this Certificate to be signed by Peter H. Kelley, its President,
and attested by Dennis K. Morgan, its Secretary, and the corporate seal of said
Southern Union Company to be affixed to this Certificate by the said Dennis K.
Morgan.

SOUTHERN UNION COMPANY
(Corporate Seal)

By:_______________________________
Peter H. Kelley
President

ATTEST:

By:____________________________
Dennis K. Morgan
Secretary

B-18

<PAGE>
STATE OF TEXAS )
) ss:
COUNTY OF TRAVIS)

On this ____ day of May, 1994, personally appeared before me, the
undersigned, a Notary Public in and for said County, Peter H. Kelley, known to
me to be the President of Southern Union Company, a Delaware corporation, who
acknowledged that he signed this Restated Certificate of Incorporation (the
"Certificate") as such officer for and on behalf of Southern Union Company, that
his signing the Certificate was his free act and deed as such officer and was
the free act and deed of Southern Union Company, and that the facts stated in
the Certificate are true.

IN WITNESS WHEREOF, I have hereunto set my hand and seal at Austin, Texas
this ____ day of May, 1994.

(Notarial Seal)

___________________________________________
Notary Public in and for the State of Texas

B-19

<PAGE>

SOUTHERN UNION COMPANY

RELEVANT SECTIONS OF THE BY-LAWS (AS PROPOSED TO BE AMENDED)

ARTICLE I - STOCKHOLDERS

ARTICLE II - DIRECTORS

Section 2. NUMBER AND TERM OF OFFICE. Except as otherwise fixed by or
pursuant to the provisions of Article FOURTH of the Company's Restated
Certificate of Incorporation relating to the rights of the holders of the
Company's Preferred Stock to elect additional directors under specified
circumstances, the number of directors which shall constitute the whole Board of
Directors shall be not less than five (5) nor more than thirteen (13). Within
such limits, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exists any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption). Any decrease
in the authorized number of directors shall not become effective until the
expiration of the term of the directors whose directorships are being eliminated
(as determined by the Board of Directors) unless, at the time of such decrease,
there shall be vacancies on the Board of Directors which are being eliminated by
the decrease. The Board of Directors shall be divided into three (3) classes
serving for those initial terms as provided in Article EIGHTH of the Company's
Restated Certificate of Incorporation. At each annual meeting of stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders. Notwithstanding
any provision of this Section 2 or Section 3 below, whenever the holders of the
Company's Preferred Stock shall have the right to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies, and other features of

<PAGE>

directorships shall be governed by the terms of the Company's Restated
Certificate of Incorporation applicable thereto.

Section 3. FILLING OF VACANCIES. Subject to the rights of the holders of
any class or series of any capital stock of the Company entitled to vote
generally in the election of directors then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
by a majority vote of the directors then in office, though less than a quorum,
and directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the class to which they
have been elected expires. No decrease in the number of authorized directors
constituting the entire Board of Directors shall shorten the term of any
incumbent director.

Section 15. EVALUATION OF BUSINESS COMBINATIONS. The Board of Directors
of the Company, when evaluating any offer of another party to make a tender or
exchange offer for any equity security of the Company or to otherwise effect a
Business Combination, shall, in connection with the exercise of its judgment as
to what is in the best interests of the Company as a whole, be authorized to
give due consideration to such factors as the Board of Directors determines to
be relevant, including, without limitation:

(i) the interests of the Company's stockholders;

(ii) whether the proposed transaction violates federal or state law;

In connection with any such evaluation, the Board of Directors is
authorized to conduct its investigation and to engage in such legal proceedings
as the Board of Directors may determine.

<PAGE>

ARTICLE X - MISCELLANEOUS PROVISIONS

SOUTHERN UNION COMPANY

DIRECTORS' DEFERRED COMPENSATION PLAN

<PAGE>
TABLE OF CONTENTS
-----------------

PAGE
----
<C> <S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1 Account . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Beneficiary . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Benefits Committee. . . . . . . . . . . . . . . . . . . 2
1.4 Deferral Contribution . . . . . . . . . . . . . . . . . 2
1.5 Director. . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Director's Fees . . . . . . . . . . . . . . . . . . . . 2
1.7 Matching Contribution . . . . . . . . . . . . . . . . . 2
1.8 Participant . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 1993 Plan Year; Plan Year . . . . . . . . . . . . . . . 2
1.11 Revenue Procedure 92-65 . . . . . . . . . . . . . . . . 2
1.12 Southern Union. . . . . . . . . . . . . . . . . . . . . 2
1.13 Southern Union Stock. . . . . . . . . . . . . . . . . . 2
1.14 Year of Vesting Service . . . . . . . . . . . . . . . . 3

ARTICLE 2 PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE 3 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 3

3.1 Director Deferral Contributions . . . . . . . . . . . . 3
3.2 Southern Union's Matching Contributions . . . . . . . . 4

ARTICLE 4 PARTICIPANT ACCOUNTS. . . . . . . . . . . . . . . . . . . . . 4

ARTICLE 5 VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

5.1 Vesting Schedule. . . . . . . . . . . . . . . . . . . . 4
5.2 Forfeitures . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE 6 DISTRIBUTIONS; SHAREHOLDER APPROVAL . . . . . . . . . . . . . 5

6.1 Distribution Event. . . . . . . . . . . . . . . . . . . 5
6.2 Shareholder Approval. . . . . . . . . . . . . . . . . . 6
6.3 Unforeseeable Emergency . . . . . . . . . . . . . . . . 6
6.4 Investment Intent . . . . . . . . . . . . . . . . . . . 7
6.5 Issuance of Certificates; Legends . . . . . . . . . . . 8

ARTICLE 7 PARTICIPANTS' RIGHTS. . . . . . . . . . . . . . . . . . . . . 8

ARTICLE 8 ANTIALIENATION. . . . . . . . . . . . . . . . . . . . . . . . 9

</TABLE>

i
<PAGE>

<TABLE>

<C> <S> <C>
ARTICLE 9 UNFUNDED STATUS . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE 10 PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . 10

10.1 Powers and Duties . . . . . . . . . . . . . . . . . . . 10
10.2 Consultants . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE 11 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . 10

11.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . 10
11.2 Termination . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE 12 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 11

12.1 Governing Law . . . . . . . . . . . . . . . . . . . . . 11
12.2 Captions. . . . . . . . . . . . . . . . . . . . . . . . 11
12.3 Facility of Payment . . . . . . . . . . . . . . . . . . 11
12.4 Withholding . . . . . . . . . . . . . . . . . . . . . . 11
12.5 Administrative Expenses . . . . . . . . . . . . . . . . 11
12.6 Severability. . . . . . . . . . . . . . . . . . . . . . 11
12.7 Liability . . . . . . . . . . . . . . . . . . . . . . . 12
12.8 Binding Effect. . . . . . . . . . . . . . . . . . . . . 12
12.9 Construction. . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>

<PAGE>
SOUTHERN UNION COMPANY

DIRECTORS' DEFERRED COMPENSATION PLAN

INTRODUCTION

WHEREAS, Southern Union Company ("Southern Union") desires to
provide rewards and incentives, under the provisions of the Southern Union
Company Directors' Deferred Compensation Plan (the "Plan"), as set forth herein,
to its directors who contribute to the success of Southern Union;

WHEREAS, it is the intention of Southern Union that the Plan will
be considered to be unfunded for all purposes, including tax purposes;

NOW, THEREFORE, effective June 1, 1993, Southern Union hereby
adopts the Plan set forth in this document.

ARTICLE 1

DEFINITIONS

Where the following words and phrases appear in the Plan, they
shall have the meanings specified below unless a different meaning is clearly
required by the context.

1.1 ACCOUNT. THE term "Account" refers to the separate account
maintained for each Participant under the provisions of Article 4, to which the
Participant's Deferral Contributions and Southern Union's Matching
Contributions, as well as income, gains and losses with respect to all such
Contributions are credited.

1.2 BENEFICIARY. The term "Beneficiary" refers to the person
or persons that the Participant designates in writing to receive a benefit
hereunder at the time of the Participant's death. If the Participant fails to
make such written designation and the Participant is not married at the time of
his death, the term "Beneficiary" refers to the executor or administrator of the
Participant's estate. If the Participant fails to make such written designation
and the Participant is married at the time of his death, the term "Beneficiary"
refers to the Participant's spouse (or the executor or administrator of the
estate of the Participant's spouse should the spouse be married to the
Participant at the time of the Participant's death but die prior to receiving
the benefit to which the spouse would have been entitled had the spouse
survived).

<PAGE>

1.3 BENEFITS COMMITTEE. The term "Benefits Committee" refers
to the Southern Union Benefits Committee which is made up of individuals
appointed by the Board of Directors of Southern Union, as it exists from time to
time. Any action (including but not limited to decisions, determinations and
interpretations) that may be taken by the Benefits Committee under the Plan may
be taken by the Secretary of the Benefits Committee on behalf of the Benefits
Committee.

1.4 DEFERRAL CONTRIBUTION. The term "Deferral Contribution"
refers to the amount that a Participant elects to defer under the provisions of
Section 3.1 and that is credited to the Participant's Account.

1.5 DIRECTOR. The term "Director" refers to each director of
Southern Union.

1.6 DIRECTOR'S FEES. The term "Director's Fees" refers to the
fees that Southern Union pays to each of its Directors for services as
Directors.

1.7 MATCHING CONTRIBUTION. The term "Matching Contribution"
refers to the amount that Southern Union credits to a Participant's Account
under the provisions of Section 3.2.

1.8 PARTICIPANT. The term "Participant" refers to a Director
who elects to make a Deferral Contribution under the provisions of Section 3.1
and for whom an Account is maintained under the provisions of Article 4.

1.9 PLAN. The term "Plan" refers to the Southern Union Company
Directors' Deferred Compensation Plan.

1.10 1993 PLAN YEAR; PLAN YEAR. The term "1993 Plan Year" shall
refer to the seven-month period beginning on June 1, 1993 (the effective date of
the Plan) and ending on December 31, 1993. The term "Plan Year" shall refer to
the 1993 Plan Year and to each subsequent calendar year beginning on or after
January 1, 1994.

1.11 REVENUE PROCEDURE 92-65. The term "Revenue Procedure 92-
65" refers to Internal Revenue Service Revenue Procedure 92-65, 1992-33 I.R.B.
16.

1.12 SOUTHERN UNION. The term "Southern Union" refers to
Southern Union Company, a corporation existing under the laws of the State of
Delaware.

1.13 SOUTHERN UNION STOCK. The term "Southern Union Stock"
refers to shares of common stock of Southern Union.

<PAGE>

1.14 YEAR OF VESTING SERVICE. A Participant shall receive
credit for a "Year of Vesting Service" for each full 12-month period during
which he serves as a Director of Southern Union. A Participant's Years of
Vesting Service shall be determined based on the Participant's period of service
as a Director of Southern Union without regard to the number of hours that the
Participant devotes to his service as a Director and without regard to whether
the Participant's period or periods of service as a Director are contiguous. In
calculating Years of Vesting Service, a Participant shall receive credit for
periods of service as a Director of Southern Union prior to the establishment of
this Plan.

ARTICLE 2

PARTICIPATION

Each Director of Southern Union who is not an employee of
Southern Union shall be eligible to participate in the Plan.

ARTICLE 3

CONTRIBUTIONS

3.1 DIRECTOR DEFERRAL CONTRIBUTIONS. For the 1993 Plan Year,
each Director may elect, in his sole discretion and on or before June 30, 1993,
to defer all or any percentage of each payment of the Director's Fees payable to
him for services rendered beginning July 1, 1993 and ending December 31, 1993.
For Plan Years subsequent to the 1993 Plan Year, each Director may elect, in his
sole discretion and at least six months prior to the commencement of the Plan
Year, to defer all or any percentage of each payment of the Director's Fees
payable to him for services rendered in the Plan Year. A Participant may elect
a Deferral Contribution under the provisions of this Section 3.1 by giving
written notice to Southern Union, which notice (a) must be received by Southern
Union within the time periods set forth above in this Section 3.1, (b) must be
in the form attached hereto as EXHIBIT A and otherwise in accordance with the
Plan, and (c) must set forth the Participant's irrevocable election as to the
percentage of each payment of his Director's Fees to be deferred in accordance
with this Section 3.1. The percentage of his Director's Fees that a Participant
elects to defer under this Section 3.1 shall be deducted from each payment of
his Director's Fees that he receives (a) for services rendered beginning July 1,
1993 and ending December 31, 1993 for the 1993 Plan Year, and (b) for services
rendered in the Plan Year to which the election relates for Plan Years
subsequent to the 1993 Plan Year. A Participant's Deferral

<PAGE>

Contributions under this Section 3.1 shall be credited to the Participant's
Account as soon as administratively feasible following the date that such
Deferral Contributions are deducted from the Director's Fees of the Participant
under this Section 3.1.

3.2 SOUTHERN UNION'S MATCHING CONTRIBUTIONS. As soon as
administratively feasible following each date that Participant Deferral
Contributions are credited to the Participant's Accounts under Section 3.1,
Southern Union shall credit to the Account of each Participant who defers a
portion of his Director's Fees as a Deferral Contribution under the provisions
of Section 3.1 3.1, 50 percent of the first seven percent of the Participant's
Director's Fees, to the extent that the Participant elects to defer such first
seven percent of his Director's Fees as a Deferral Contribution under the
provisions of Section 3.1 3.1, with respect to each of the Director's Fees
payable to the Participant (a) for services rendered beginning July 1, 1993 and
ending December 31, 1993 for the 1993 Plan Year, and (b) for services rendered
in the Plan Year to which the election relates for Plan Years subsequent to the
1993 Plan Year. Southern Union's Matching Contributions with respect to a
Participant's Deferral Contributions shall be made in the form of Southern Union
Stock.

ARTICLE 4

PARTICIPANT ACCOUNTS

A separate Account shall be established and maintained for each
Participant and shall reflect the elected Deferral Contributions that are
credited to a Participant's Account under the provisions of Section 3.1,
Southern Union's Matching Contributions that are credited to a Participant's
Account under the provisions of Section 3.2, and all income, gains and losses
from time to time credited with respect to such amounts.

ARTICLE 5

VESTING

5.1 VESTING SCHEDULE. Subject to the provisions of Article 7,
that portion of a Participant's Account that is attributable to the
Participant's Deferral Contributions deferred under the provisions of Section
3.1 and to the income, gains and losses with respect thereto shall be 100
percent vested at all times. Subject to the provisions of Section 6.1, Article
7 and Section 11.2, that portion of a Participant's Account that is attributable
to Southern

<PAGE>

Union's Matching Contributions that are credited to the Participant's Account
under the provisions of Section 3.2 and to the income, gains and losses with
respect thereto shall vest, based on the Participant's Years of Vesting Service,
as defined in Section 1.14, in accordance with the following schedule:

YEARS OF VESTING SERVICE VESTED PERCENTAGE
------------------------ -----------------

<S> <C>
Less than 5 years 0%
5 or more years 100%
</TABLE>

The preceding sentence notwithstanding, subject to the provisions of Article 6,
Article 7 and Section 11.2 and subject to the limitation of the following
sentence, that portion of a Participant's Account that is attributable to
Southern Union's Matching Contributions that are credited to the Participant's
Account pursuant to the provisions of Section 3.2 and to the income, gains and
losses with respect thereto shall become 100 percent vested upon the death of
the Participant while the Participant is serving as a Director of Southern
Union. If a Participant dies while serving as a Director of Southern Union and
before such time as the Plan is approved by the shareholders of Southern Union,
the Matching Contributions that are credited to such Participant's Account
pursuant to the provisions of Section 3.2 and to the income, gains and losses
with respect thereto shall become 100 percent vested at such time as the Plan
may be approved by the shareholders of Southern Union, and the provisions of
Section 6.2 shall apply to such funds if the Plan is not approved by the
shareholders under the provisions of Section 6.2.

5.2 FORFEITURES. That portion of a Participant's Account that
is not vested upon the Participant's termination of service as a Director of
Southern Union and that is forfeited shall, at the discretion of Southern Union,
be used to pay expenses relating to the Plan and/or be allocated in the Plan
Year in which the forfeiture occurs (and, if necessary, in subsequent Plan
Years) in the same manner and amounts as Southern Union's Matching Contributions
are allocated under Section 3.2 for such Plan Year or Years, thereby reducing
Southern Union's Matching Contributions for the Plan Year or Years in which so
allocated.

ARTICLE 6

DISTRIBUTIONS; SHAREHOLDER APPROVAL

6.1 DISTRIBUTION EVENT. Except in the case of an earlier
distribution required by Section 11.2, (a) if a Participant ceases to serve as a
Director of Southern Union after such time as the

<PAGE>

Plan is approved by the shareholders of Southern Union, the Participant, if he
is living (or the Participant's Beneficiary if the Participant is not living),
shall receive a distribution of the vested portion of the Participant's Account,
as determined under Section 5.1, not later than 30 days following the date on
which the Participant ceases to serve as a Director of Southern Union, and (b)
if a Participant ceases to serve as a Director of Southern Union before such
time as the Plan is approved by the shareholders of Southern Union, subject to
the provisions of Section 6.2, the Participant, if he is living (or the
Participant's Beneficiary if the Participant is not living), shall receive that
portion of his Account that is attributable to the Participant's elected
Deferral Contributions and to the income, gains and losses with respect to such
elected Deferral Contributions not later than 30 days following the date on
which the Participant ceases to serve as a Director of Southern Union and shall
receive that vested portion of his Account, as determined under Section 5.1,
that is attributable to Southern Union's Matching Contributions and to the
income, gains and losses with respect to such Matching Contributions not later
than 30 days following the date on which the shareholders of Southern Union
approve the Plan.

6.2 SHAREHOLDER APPROVAL. Any other provision of the Plan
notwithstanding, in the event that the shareholders of Southern Union do not
approve the Plan at the first annual meeting of shareholders following the
effective date of the Plan, each Participant shall forfeit all rights to that
portion of his Account that is attributable to Southern Union's Matching
Contributions and to the income, gains and losses with respect to such Matching
Contributions, distributions of that portion of each Participant's Account that
is attributable to the Participant's elected Deferral Contributions and to the
income, gains and losses with respect to such elected Deferral Contributions
shall be made not later than 30 days after the date of the first annual meeting
of shareholders following the effective date of the Plan and there shall be no
further Deferral Contributions or Matching Contributions hereunder.

6.3 UNFORESEEABLE EMERGENCY. In the case of a proven
unforeseeable emergency, as determined under this Section 6.3, and in the
discretion of the Benefits Committee in accordance with uniform principles
consistently applied, the Benefits Committee may permit a Participant to
withdraw a portion of his Account under the Plan. Until such time as the Plan
is approved by the shareholders of Southern Union, no withdrawal under this
Section 6.3 may be made from that portion of a Participant's Account that is
attributable to Southern Union's Matching Contributions and to the income, gains
and losses with respect to such Matching Contributions. An unforeseeable
emergency justifying a withdrawal under this Section 6.3 must constitute an
unanticipated emergency that is caused by an

<PAGE>

event beyond the control of the Participant and that would result in severe
financial hardship to the Participant if the early withdrawal were not
permitted. An unforeseeable emergency justifying a withdrawal under this
Section 6.3 must constitute a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Internal Revenue Code Section 152(a)) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case,
but, in any case, a withdrawal may not be made under this Section 6.3 to the
extent that the hardship is or may be relieved (i) by reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship, or (iii) by cessation of Deferral Contributions under
the Plan. Examples, without limitation, of circumstances that are not to be
considered unforeseeable emergencies under this Section 6.3 include the need to
send a Participant's child to college or the desire to purchase a home. An
unforeseeable emergency withdrawal under this Section 6.3 shall be limited to
the amount necessary to satisfy the emergency need, as determined in the
discretion of the Benefits Committee.

6.4 INVESTMENT INTENT. Except as provided in Section 6.3, a
Participant shall, contemporaneously with his receipt of a distribution of
Southern Union Stock hereunder, execute and deliver to Southern Union a written
statement, in form satisfactory to Southern Union, in which such Participant
represents and warrants that such Participant has acquired the shares of
Southern Union Stock distributed hereunder for such Participant's own account,
for investment only and not with a view to the resale or distribution thereof,
and agrees that any subsequent offer for sale or sale or distribution of any of
such shares of Southern Union Stock shall be made only pursuant to either (a) a
Registration Statement on an appropriate form under the Securities Act of 1933,
as amended (the "Securities Act"), which Registration Statement has become
effective and is current with regard to the shares of Southern Union Stock being
offered or sold, or (b) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption the holder shall, if so
requested by Southern Union, prior to any offer for sale or sale of such shares
of Southern Union Stock, obtain a prior favorable written opinion, in form and
substance satisfactory to Southern Union, from counsel for or approved by
Southern Union, as to the applicability of such exemption thereto. The
foregoing restriction on shares of Southern Union Stock distributed hereunder
shall not apply to (i) issuances

<PAGE>

by Southern Union so long as the shares of Southern Union Stock being issued are
registered under the Securities Act and a prospectus in respect thereof is
current or (ii) reofferings of shares of Southern Union Stock by affiliates of
Southern Union as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) if the shares of Southern Union Stock
being reoffered are registered under the Securities Act and a prospectus in
respect thereof is current.

6.5 ISSUANCE OF CERTIFICATES; LEGENDS. Southern Union may
endorse such legend or legends upon the certificates for shares of Southern
Union Stock distributed hereunder and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares of Southern Union
Stock as, in its discretion, it determines to be necessary or appropriate to (i)
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, or (ii) implement the provisions of the Plan
and any agreement between Southern Union and the holder of such shares of
Southern Union Stock.

ARTICLE 7

PARTICIPANTS' RIGHTS

Nothing contained in this Plan shall be construed as giving any
Participant the right to be retained as a Director of Southern Union. Nothing
contained in this Plan shall be construed as limiting, in any way, any right
that any party or parties may have to remove a Participant as a Director of
Southern Union or to appoint or to elect another individual to replace a
Participant as a Director of Southern Union. Nothing contained in this Plan
shall be construed as giving any Participant the right to receive any benefit
not specifically provided by the Plan. Any other provision of the Plan
notwithstanding, a Participant shall not have any interest in the amounts
credited to his Account until such Account is distributed in accordance with the
provisions of Article 6 or Section 11.2, and all Deferral Contributions,
Matching Contributions and all earnings, gains and losses with respect to all
such Contributions shall remain subject to the claims of Southern Union's
general creditors in accordance with the provisions of the Plan. With respect
to amounts credited to a Participant's Account, the rights of the Participant,
the Beneficiary of the Participant or any other person claiming through the
Participant under this Plan shall be solely those of unsecured general creditors
of Southern Union, and the obligations of Southern Union hereunder shall be
purely contractual. Such benefits shall be paid from the general assets of
Southern Union. As contemplated by Revenue Procedure 92-65, Participants shall
have

<PAGE>

the status of general unsecured creditors of Southern Union and the Plan shall
constitute a mere promise of Southern Union to make benefit payments in the
future.

ARTICLE 8

ANTIALIENATION

The rights of a Participant to the payment of deferred
compensation as provided in this Plan and the rights of a Participant with
respect to amounts credited to his Account shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation or anticipation.
No Participant may borrow against his Account. No Account shall be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, whether
voluntary or involuntary, including but not limited to any liability which is
for alimony or other payments for the support of a spouse or former spouse, or
for any other relative of a Participant. Neither a Participant's Account
hereunder nor a Participant's rights to benefits hereunder may be assigned to
any other party by means of a judgment, decree or order (including approval of a
property settlement agreement) relating to the provision of child support,
alimony payments, or marital property rights of a spouse, former spouse, child
or other dependent of the Participant. As contemplated by Revenue Procedure
92-65, a Participant's rights to benefit payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or the Participant's Beneficiary.

ARTICLE 9

UNFUNDED STATUS

Any and all payments made to a Participant pursuant to the Plan
shall be made from the general assets of Southern Union. Any payments made in
good faith under the terms of the Plan to a Participant, his Beneficiary or to
any other party under the provisions of Section 12.3 shall fully discharge the
Plan, Southern Union and the Benefits Committee from all further obligations
with respect to such payments. Southern Union intends that the Plan shall be
considered unfunded for all purposes, including tax purposes.

<PAGE>

ARTICLE 10

PLAN ADMINISTRATION

10.1 POWERS AND DUTIES. The Benefits Committee shall administer
the Plan and shall keep records of individual Accounts. It shall have the
authority to interpret, construe and implement the Plan, to adopt and review
rules and regulations relating to the Plan and to make all other determinations
relating to the administration of the Plan. Any decision or interpretation of
any provision of the Plan adopted by the Benefits Committee shall be final and
conclusive. A Participant who is also a member of the Benefits Committee shall
not participate in any decision involving any requests made by him or relating
in any way solely to his rights, duties and obligations as a Participant under
the Plan.

10.2 CONSULTANTS. The Benefits Committee may employ such
counsel, accountants, actuaries and other agents as it shall deem advisable.
Southern Union shall pay the compensation of such counsel, accountants,
actuaries and other agents and any other expenses incurred by the Benefits
Committee in the administration of the Plan to the extent that such compensation
and expenses are not paid from forfeitures under the provisions of Section 5.2.

ARTICLE 11

AMENDMENT AND TERMINATION

11.1 AMENDMENT. Southern Union reserves the right to amend or
to modify the Plan at any time by formal action of its Board of Directors,
including the right to amend or to modify the Plan retroactively, as long as the
amendment or modification does not adversely affect a Participant's rights with
respect to vested amounts then credited to his Account, which rights are subject
to the provisions of the Plan, including the provisions of Article 6, Article 7
and Section 11.2.

11.2 TERMINATION. Southern Union reserves the right to
terminate the Plan at any time by formal action of its Board of Directors and
approval of its shareholders. If the Plan is terminated after such time as the
Plan is approved by the shareholders of Southern Union, notwithstanding Article
5 of the Plan, upon termination of the Plan, each Participant shall become 100
percent vested in his Account and distributions of all amounts credited to the
Participants' Accounts shall be made not later than 30 days after the
termination of the Plan. If the Plan is terminated before such time as the Plan
is approved by the shareholders of Southern Union, each Participant shall
forfeit all

<PAGE>

rights to that portion of his Account that is attributable to Southern Union's
Matching Contributions and to the income, gains and losses with respect to such
Matching Contributions, and distributions of that portion of each Participant's
Account that is attributable to the Participant's elected Deferral Contributions
and to the income, gains and losses with respect to such elected Deferral
Contributions shall be made not later than 30 days after the termination of the
Plan.

ARTICLE 12

GENERAL PROVISIONS

12.1 GOVERNING LAW. Except to the extent superseded by federal
law, the laws of the State of Texas shall be controlling in all matters relating
to the Plan, including the construction and performance hereof, notwithstanding
principles of conflicts of laws.

12.2 CAPTIONS. The captions of Articles and Sections of this
Plan are for convenience of reference only and shall not control or affect the
meaning or construction of any of its provisions.

12.3 FACILITY OF PAYMENT. Any amounts payable hereunder to any
person who is under legal disability or who, in the judgment of the Benefits
Committee, is unable to manage his financial affairs properly may be paid to the
legal representative of such person or may be applied for the benefit of such
person in any manner that the Benefits Committee may select, and any such
payment shall be deemed to be payment for such person's account.

12.4 WITHHOLDING. To the extent required by the laws in effect
at the time compensation or deferred compensation payments are made hereunder,
Southern Union shall withhold from such compensation, or from such deferred
compensation payments, any taxes required to be withheld for federal, state or
local government purposes.

12.5 ADMINISTRATIVE EXPENSES. All expenses relating to the Plan
and its administration shall, at the discretion of Southern Union, be paid from
forfeitures under the provisions of Section 5.2 or shall be borne by Southern
Union.

12.6 SEVERABILITY. Any provision of this Plan prohibited by the
law of any jurisdiction, shall, as to such jurisdiction, be ineffective to the
extent of such prohibition without invalidating the remaining provisions hereof.

<PAGE>

12.7 LIABILITY. Except as otherwise expressly provided herein,
no member of the Board of Directors of Southern Union, no member of the Benefits
Committee, and no officer, employee or agent of Southern Union or the Benefits
Committee (specifically including but not limited to an employee of Southern
union acting at the direction of the Benefits Committee) shall have any
liability to any person, firm or corporation based on or arising out of the Plan
except in the case of gross negligence or fraud. Southern Union agrees to
indemnify each member of its Board of Directors and each member of its Benefits
Committee against all liabilities arising out of the performance of his duties
hereunder, excluding liabilities resulting from the member's gross negligence or
fraud.

12.8 BINDING EFFECT. This Plan shall be binding upon and shall
inure to the benefit of Southern Union, its successors and assigns and each
Participant and his heirs, executors, administrators and legal representatives.

12.9 CONSTRUCTION. Any words herein used in the masculine shall
be read and construed in the feminine where they would so apply. Words in the
singular shall be read and construed as though used in the plural in all cases
where they would so apply.

EXECUTED this _____ day of June, 1993.

SOUTHERN UNION COMPANY

By:________________________________
Title:_____________________________

12
<PAGE>
EXHIBIT A

ELECTION FORM

SOUTHERN UNION COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
(the "Deferred Compensation Plan")

( ) I irrevocably elect to defer under the Deferred Compensation Plan _____
percent (not to exceed 100 percent) of each payment of director's fees that
I may be entitled to receive from Southern Union Company ("Southern Union")
for services that I render as a director in 199__.

( ) I do not elect to defer any portion of my director's fees under the
Deferred Compensation Plan for services that I render as a director in
199__.

Subject to the provisions of the second paragraph following this paragraph, I
understand that Southern Union will match 50 percent of the first seven percent
of each payment of my director's fees that I elect to defer under the above
deferral election and that, in general, Southern Union's matching contributions
will not vest until the Deferred Compensation Plan is approved by the
stockholders of Southern Union and until I have completed five years of service
as a director of Southern Union.

Subject to the provisions of the following paragraph, I understand that the
value of my account under the Deferred Compensation Plan, which will reflect
contributions under the above deferral election as well as matching
contributions, will increase if the assets set aside to distribute benefits
under the Deferred Compensation Plan when they become due appreciate in value
and earn income and will decrease if such assets depreciate in value and
experience losses.

I understand that deferrals and other amounts set aside under the Deferred
Compensation Plan will be subject to the claims of Southern Union's general
creditors and that I will be considered an unsecured creditor with respect to my
benefits under the Deferred Compensation Plan.

I also understand that the Deferred Compensation Plan does not provide for loans
and that, unless the Deferred Compensation Plan is terminated, generally, I will
not have access to the director's fees that I elect to defer under the Deferred
Compensation Plan until 30 days following the date on which my services as a
director of Southern Union terminate and that, unless the Deferred Compensation
Plan is terminated, generally, I will have access to Southern Union's vested
matching contributions that are set aside for me under the Deferred Compensation
Plan at the same time that I have access to my deferrals under the Deferred
Compensation Plan, except that matching contributions will not be available
until the stockholders of Southern Union approve the Deferred Compensation Plan.

Further, I understand that until the Deferred Compensation Plan is approved by
the stockholders of Southern Union, all purchases of Southern Union common stock
that are credited to my participant account under the terms of the Deferred

<PAGE>

Compensation Plan will be subject to the short-swing profit provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, and that I may
not directly or indirectly sell or dispose of ANY shares of Southern Union
common stock which I may be considered to beneficially own for securities law
purposes, however acquired, until at least six months after the earlier of (i)
the date that the Deferred Compensation Plan is approved by Southern Union's
stockholders or (ii) the date that I am no longer deferring director's fees
under the Deferred Compensation Plan.

Finally, I understand that my rights to benefits under the Deferred Compensation
Plan will be subject to the terms of the Deferred Compensation Plan.

EXECUTED this ____ day of _____________, 199__.

__________________________________________
Participant
Print Name:_______________________________

2
<PAGE>

TRUST UNDER

THE SOUTHERN UNION COMPANY

SUPPLEMENTAL DEFERRED COMPENSATION PLAN

<PAGE>

TABLE OF CONTENTS

PAGE
----

SECTION 1 ESTABLISHMENT OF TRUST.................................. 2

SECTION 2 PAYMENTS TO PLAN PARTICIPANTS AND
THEIR BENEFICIARIES..................................... 2

SECTION 3 TRUSTEE RESPONSIBILITY REGARDING
PAYMENTS TO TRUST BENEFICIARY WHEN
COMPANY IS INSOLVENT.................................... 3

SECTION 4 PAYMENTS TO COMPANY..................................... 5

SECTION 5 INVESTMENT AUTHORITY.................................... 5

SECTION 6 DISPOSITION OF INCOME................................... 5

SECTION 7 ACCOUNTING BY TRUSTEE................................... 6

SECTION 8 RESPONSIBILITY OF TRUSTEE............................... 6

SECTION 9 COMPENSATION AND EXPENSES OF TRUSTEE.................... 7

SECTION 10 RESIGNATION AND REMOVAL OF TRUSTEE...................... 7

SECTION 11 APPOINTMENT OF SUCCESSOR TRUSTEE........................ 8

SECTION 12 AMENDMENT OR TERMINATION................................ 9

SECTION 13 MISCELLANEOUS........................................... 9

SECTION 14 EFFECTIVE DATE.......................................... 10

<PAGE>

TRUST UNDER THE SOUTHERN UNION COMPANY

SUPPLEMENTAL DEFERRED COMPENSATION PLAN

(a) This Agreement made this _____ day of ________________, 1993, by
and between Southern Union Company ("Company") and Texas Commerce
Bank--Austin, N.A. ("Trustee").

(b) WHEREAS, Company has adopted the nonqualified deferred
compensation Plan as listed in APPENDIX A (the "Plan");

(c) WHEREAS, Company's purpose in adopting the Plan is to retain the
services of and to provide rewards and incentives to members of a select group
of management employees who contribute to the success of Company;

(d) WHEREAS, the Plan will provide those supplemental retirement
benefits that are provided for in the Plan to certain management employees who
are selected in accordance with the provisions of the Plan;

(e) WHEREAS, Company has incurred or expects to incur liability under
the terms of such Plan with respect to the individuals participating in such
Plan;

(f) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;

(g) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of
1974;

(h) WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan;

NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:

<PAGE>

SECTION 1

ESTABLISHMENT OF TRUST

(a) Company hereby deposits with Trustee in trust $10.00, which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.

(b) The Trust shall become irrevocable 30 days following the issuance
of a favorable private letter ruling regarding the Trust from the Internal
Revenue Service. Company may revoke the Trust at any time prior to the time
when the Trust becomes irrevocable.

(c) The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.

(d) The principal of the Trust and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively
for the uses and purposes of Plan participants and general creditors as herein
set forth. Plan participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust.
Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against Company. Any assets held by the Trust will be subject to the claims
of Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.

(e) Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with Trustee
to augment the principal to be held, administered and disposed of by Trustee
as provided in this Trust Agreement. Neither Trustee nor any Plan participant
or beneficiary shall have any right to compel such additional deposits.

SECTION 2

PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES

(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to Trustee for determining the amounts so payable, the
form in which such amount

<PAGE>

is to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. Except as otherwise provided
herein, Trustee shall make payments to the Plan participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall
make provision for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.

(b) The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan shall be determined by Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.

(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. Company shall notify Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants or
their beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, Company shall make the balance of each
such payment as it falls due. Trustee shall notify Company where principal
and earnings are not sufficient.

SECTION 3

TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT

(a) Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to
pay its debts as they become due, or (ii) Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.

(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set
forth below.

<PAGE>

(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in
writing to Trustee that Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such determination, Trustee shall
discontinue payment of benefits to Plan participants or their beneficiaries.

(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to be a
creditor alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and that
provides Trustee with a reasonable basis for making a determination concerning
Company's solvency.

(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of Company with respect to benefits due
under the Plan or otherwise.

(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that Company is not Insolvent (or
is no longer Insolvent).

(c) Provided that there are sufficient assets, if trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any payments made
to Plan participants or their beneficiaries by Company in lieu of the payments
provided for hereunder during any such period of discontinuance.

<PAGE>

SECTION 4

PAYMENTS TO COMPANY

Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return
to Company or to divert to others any of the Trust assets before all payments
of benefits have been made to Plan participants and their beneficiaries
pursuant to the terms of the Plan.

SECTION 5

INVESTMENT AUTHORITY

(a) Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. All rights associated with
assets of the Trust shall be exercised by Trustee or the person designated by
Trustee, and shall in no event be exercisable by or rest with Plan
participants, except that voting rights with respect to Trust assets will be
exercised by Company.

(b) Company shall have the right at anytime, and from time to time in
its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by Company in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.

(c) To the extent practical, and without regard to requirements of
diversification under the Texas Trust Code or other applicable law, all
contributions to the Trust shall be invested by the Trustee in securities
issued by the Company so long as such securities are and remain investments
that persons of ordinary prudence, discretion and intelligence acquire or
retain for their own account. Pending investment in securities issued by
Company, Trustee may invest contributions in a money market fund or in such
other investments as it shall determine in its discretion.

SECTION 6

DISPOSITION OF INCOME

During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.

<PAGE>

SECTION 7

ACCOUNTING BY TRUSTEE

Trustees shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within 60 days following the close of each calendar year
and within 60 days after the removal or resignation of Trustee, Trustee shall
deliver to Company a written account of its administration of the Trust during
such year or during the period from the close of the last preceding year to
the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the date of such
removal or resignation, as the case may be.

SECTION 8

RESPONSIBILITY OF TRUSTEE

(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant
to a direction, request or approval given by Company which is contemplated by,
and in conformity with, the terms of the Plan or this Trust and is given in
writing by Company. In the event of a dispute between Company and a party,
Trustee may apply to a court of competent jurisdiction to resolve the dispute.

(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments other than in the case of litigation arising as a result of the
Trustee's gross negligence or willful misconduct. If Company does not pay
such costs, expenses and liabilities in a reasonably timely manner, Trustee
may obtain payment from the Trust.

<PAGE>

(c) Trustee may consult with legal counsel (who may also be counsel
for Company generally) with respect to any of its duties or obligations
hereunder.

(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.

(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.

(f) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.

SECTION 9

COMPENSATION AND EXPENSES OF TRUSTEE

Trustee shall be entitled to receive such reasonable compensation for
its services as Trustee as shall be agreed upon by Company and Trustee.
Except as otherwise provided herein, Trustee shall also be entitled to receive
or to be reimbursed for its reasonable expenses incurred with respect to the
administration of the Trust. Company shall pay all administrative and
Trustee's fees and expenses. If not so paid, the fees and expenses shall be
paid from the Trust.

SECTION 10

RESIGNATION AND REMOVAL OF TRUSTEE

(a) Trustee may resign at any time by written notice to Company,
which shall be effective 30 days after receipt of such notice unless Company
and Trustee agree otherwise.

<PAGE>

(b) Trustee may be removed by Company on 30 days notice or upon
shorter notice accepted by Trustee.

(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 45 days after
receipt of notice of resignation, removal or transfer, unless Company extends
the time limit.

(d) If Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.

SECTION 11

APPOINTMENT OF SUCCESSOR TRUSTEE

(a) If Trustee resigns (or is removed) in accordance with Section
10(a) or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.

(b) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject
to Sections 7 and 8 hereof. The successor Trustee shall not be responsible
for and Company shall indemnify and defend the successor Trustee from any
claim or liability resulting from any action or inaction of any prior Trustee
or from any other past event, or any condition existing at the time it becomes
successor Trustee.

<PAGE>

SECTION 12

AMENDMENT OR TERMINATION

(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.

(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan unless sooner revoked in accordance with
Section 1(b) hereof. Upon termination of the Trust any assets remaining in
the Trust shall be returned to Company.

(c) Upon written approval of the participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plan, Company may
terminate this Trust prior to the time all benefit payments under the Plan
have been made. All assets in the Trust at termination shall be returned to
Company.

SECTION 13

MISCELLANEOUS

(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.

(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process. Any
attempted transfer, pledge, assignment or other action in violation of this
Section 13(b) shall be ineffective.

(d) Wherever the context so admits and such treatment is necessary to
interpret this Trust Agreement in accordance with its apparent intent, the use
herein of the singular shall include the plural and vice versa and the use of
the feminine, masculine or neuter gender shall be deemed to include the other
genders.

<PAGE>

SECTION 14

EFFECTIVE DATE

The effective date of this Trust Agreement shall be
______________________, 1993.

COMPANY:

SOUTHERN UNION COMPANY

By:_________________________________
Printed Name:____________________
Title:___________________________

TRUSTEE:

TEXAS COMMERCE BANK--AUSTIN, N.A.

By:_________________________________
Printed Name:____________________
Title:___________________________

<PAGE>

APPENDIX A

South Union Company Supplemental
Deferred Compensation Plan,
as it may be amended
from time to time as
provided therein

<PAGE>

SOUTHERN UNION COMPANY

SUPPLEMENTAL DEFERRED COMPENSATION PLAN

<PAGE>

TABLE OF CONTENTS

PAGE

INTRODUCTION............................................................... 1

ARTICLE 1 DEFINITIONS................................................... 1

1.1 Account................................................ 1
1.2 Beneficiary............................................ 2
1.3 Benefits Committee..................................... 2
1.4 Code................................................... 2
1.5 Compensation........................................... 2
1.6 Employee Salary Deferral Amount........................ 2
1.7 Employee Salary Deferral Contribution.................. 3
1.8 Employer Discretionary Amount.......................... 3
1.9 Employer Discretionary Contribution.................... 3
1.10 Employer Matching Amount............................... 3
1.11 Employer Matching Contribution......................... 3
1.12 Distribution Event..................................... 3
1.13 Highly Compensated Employee............................ 3
1.14 1934 Act............................................... 3
1.15 1994 Shareholders' Meeting............................. 3
1.16 Non-Salary Deferral Amount............................. 4
1.17 Other Participant...................................... 4
1.18 Participant............................................ 4
1.19 Plan................................................... 4
1.20 Plan Year; 1993 Plan Year.............................. 4
1.21 Revenue Procedure 92-64................................ 4
1.22 Revenue Procedure 92-65................................ 4
1.23 Section 16(b) Participant.............................. 4
1.24 Southern Union......................................... 4
1.25 Southern Union Stock................................... 4
1.26 Trust.................................................. 5
1.27 Year of Vesting Service................................ 5

ARTICLE 2 PARTICIPATION................................................. 5

2.1 Eligible Class......................................... 5
2.2 Selection from Eligible Class.......................... 5

ARTICLE 3 CONTRIBUTIONS................................................. 6

3.1 Employee Salary Deferral Contributions................. 6
3.2 Employer Matching Contributions........................ 6
3.3 Employer Discretionary Contributions................... 7

ARTICLE 4 PARTICIPANT ACCOUNTS.......................................... 8

<PAGE>

ARTICLE 5 VESTING....................................................... 8
5.1 Vesting Schedule....................................... 8
5.2 Forfeitures............................................ 8

ARTICLE 6 DISTRIBUTIONS................................................. 9

6.1 Termination of Employment.............................. 9
6.2 Unforeseeable Emergency................................ 9
6.3 Investment Intent...................................... 10
6.4 Issuance of Certificates; Legends...................... 10

ARTICLE 7 RESTRICTIONS APPLICABLE TO SECTION 16(b)
PARTICIPANTS.................................................. 11

7.1 Shareholder Approval................................... 11
7.2 Employee Salary Deferral Contributions................. 11
7.3 Other Contributions.................................... 12
7.4 Vesting................................................ 13

ARTICLE 8 PARTICIPANTS' RIGHTS.......................................... 13

ARTICLE 9 ANTIALIENATION................................................ 14

ARTICLE 10 UNFUNDED STATUS............................................... 14

ARTICLE 11 PLAN ADMINISTRATION........................................... 15

11.1 Powers and Duties...................................... 15
11.2 Consultants............................................ 15

ARTICLE 12 AMENDMENT AND TERMINATION..................................... 15

12.1 Amendment.............................................. 15
12.2 Termination............................................ 15

ARTICLE 13 CLAIMS PROCEDURE.............................................. 16

13.1 Claims................................................. 16
13.2 Notice of Decision..................................... 16
13.3 Content of Notice...................................... 16
13.4 Appeal Procedure....................................... 17
13.5 Review Procedure....................................... 17
13.6 Disputes............................................... 17
13.7 Appeals Committee...................................... 17

<PAGE>

ARTICLE 14 GENERAL PROVISIONS............................................ 18
14.1 Governing Law.......................................... 18
14.2 Captions............................................... 18
14.3 Facility of Payment.................................... 18
14.4 Withholding............................................ 18
14.5 Administrative Expenses................................ 18
14.6 Severability........................................... 18
14.7 Liability.............................................. 18
14.8 Binding Effect......................................... 19
14.9 Construction........................................... 19

iii

<PAGE>

SOUTHERN UNION COMPANY

SUPPLEMENTAL DEFERRED COMPENSATION PLAN

INTRODUCTION

WHEREAS, Southern Union Company ("Southern Union") desires to retain the
services of and to provide rewards and incentives to members of a select group
of management employees who contribute to the success of Southern Union;

WHEREAS, the Southern Union Company Supplemental Deferred Compensation
Plan (the "Plan"), as set forth herein, is intended, in general, to provide
supplemental retirement benefits to certain management employees who have been
selected to participate in the Plan and who elect to defer income under the
terms of the Plan;

WHEREAS, some of the benefits to be provided under the Plan may, in
general, be similar to the benefits that would have been provided under the
Southern Union Savings Plan in the absence of certain limitations that are set
forth in the Internal Revenue Code of 1986, as amended (the "Code"), relating
to "highly compensated employees," as defined in the Code;

WHEREAS, it is the intention of Southern Union that the Plan will be
considered to be unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974;

WHEREAS, it is contemplated that funds set aside by Southern Union to
meet obligations under the Plan may be held in the Southern Union Company
Supplemental Executive Retirement Trust, which will conform to the terms of
the model trust described in Revenue Procedure 92-64;

NOW, THEREFORE, effective June 1, 1993, Southern Union hereby adopts the
Plan set forth in this document.

ARTICLE 1

DEFINITIONS

Where the following words and phrases appear in the Plan, they shall
have the meanings specified below unless a different meaning is clearly
required by the context.

1.1 ACCOUNT. The term "Account" refers to the separate account
maintained for each Participant under the provisions of Article 4, to which
the Participant's Employee Salary Deferral

<PAGE>

Contributions, Southern Union's Employer Matching Contributions and Southern
Union's Employer Discretionary Contributions, if any, as well as income, gains
and losses with respect to all such Contributions are credited.

1.2 BENEFICIARY. The term "Beneficiary" refers to the person or
persons that the Participant designates in writing to receive a benefit
hereunder at the time of the Participant's death. If the Participant fails to
make such written designation and the Participant is not married at the time
of his death, the term "Beneficiary" refers to the executor or administrator
of the Participant's estate. If the Participant fails to make such written
designation and the Participant is married at the time of his death, the term
"Beneficiary" refers to the Participant's spouse (or the executor or
administrator of the estate of the Participant's spouse should the spouse be
married to the Participant at the time of the Participant's death but die
prior to receiving the benefit to which the spouse would have been entitled
had the spouse survived).

1.3 BENEFITS COMMITTEE. The term "Benefits Committee" refers to
the Southern Union Benefits Committee which is made up of individuals
appointed by the Board of Directors of Southern Union, as it exists from time
to time. Any action (including but not limited to decisions, determinations
and interpretations) that may be taken by the Benefits Committee under the
Plan may be taken by the Secretary of the Benefits Committee on behalf of the
Benefits Committee.

1.4 CODE. The term "Code" refers to the Internal Revenue Code of
1986, as amended, and as may be amended from time to time subsequent to the
date that this Plan is executed.

1.5 COMPENSATION. The term "Compensation" includes an individual's
base salary from Southern Union, bonuses from Southern Union, salary deferrals
under the Southern Union Savings Plan, which is a Code Section 401(k) plan,
and salary deferrals under the Southern Union Company Employee Flexible
Benefits Plan, which is a Code Section 125 plan, and excludes any severance
payments that an individual may receive from Southern Union.

1.6 EMPLOYEE SALARY DEFERRAL AMOUNT. The term "Employee Salary
Deferral Amount" refers to that portion of a Participant's Account that is
attributable to Employee Salary Deferral Contributions and all income, gains
and losses attributable thereto.

<PAGE>

1.7 EMPLOYEE SALARY DEFERRAL CONTRIBUTION. The term "Employee
Salary Deferral Contribution" refers to the amount that a Participant elects
to defer under the provisions of Section 3.1 and that is credited to the
Participant's Account.

1.8 EMPLOYER DISCRETIONARY AMOUNT. The term "Employer
Discretionary Amount" refers to that portion of a Participant's Account that
is attributable to Employer Discretionary Contributions and all income, gains
and losses attributable thereto.

1.9 EMPLOYER DISCRETIONARY CONTRIBUTION. The term "Employer
Discretionary Contribution" refers to the amount that the Board of Directors
of Southern Union elects, in its sole and absolute discretion, to credit to a
Participant's Account under the provisions of Section 3.3.

1.10 EMPLOYER MATCHING AMOUNT. The term "Employer Matching Amount"
refers to that portion of a Participant's Account that is attributable to
Employer Matching Contributions and all income, gains and losses attributable
thereto.

1.11 EMPLOYER MATCHING CONTRIBUTION. The term "Employer Matching
Contribution" refers to the amount that Southern Union credits to a
Participant's Account under the provisions of Section 3.2.

1.12 DISTRIBUTION EVENT. The term "Distribution Event" refers to an
event after which a Participant other than a Section 16(b) Participant would
be entitled to receive a distribution following his termination of employment
with Southern Union under Section 6.1, following a determination by the
Benefits Committee that he is entitled to an unforeseeable emergency
withdrawal under Section 6.2, or following Southern Union's termination of the
Plan under Section 12.2.

1.13 HIGHLY COMPENSATED EMPLOYEE. The term "Highly Compensated
Employee" refers to each employee of Southern Union who qualifies as a "highly
compensated employee" under the provisions of Code Section 414(q).

1.14 1934 ACT. The term "1934 Act" refers to the Securities
Exchange Act of 1934, as amended, and as may be amended from time to time
subsequent to the date that this Plan is executed.

1.15 1994 SHAREHOLDERS' MEETING. The term "1994 Shareholders'
Meeting" refers to the first annual meeting of Southern Union shareholders
following the effective date of the Plan.

<PAGE>

1.16 NON-SALARY DEFERRAL AMOUNT. The term "Non-Salary Deferral
Amount" refers to that portion of a Participant's Account comprised of the
Employer Matching Amount and the Employer Discretionary Amount.

1.17 OTHER PARTICIPANT. The term "Other Participant" refers to a
Participant not designated by Southern Union to be an officer subject to the
provisions of Section 16(b) of the 1934 Act.

1.18 PARTICIPANT. The term "Participant" refers to a management
employee of Southern Union who is eligible to participate in the Plan under
the provisions of Section 2.1, who is selected to participate in the Plan
under the provisions of Section 2.2 and for whom an Account is maintained
under the provisions of Article 4.

1.19 PLAN. The term "Plan" refers to the Southern Union Company
Supplemental Deferred Compensation Plan.

1.20 PLAN YEAR; 1993 PLAN YEAR. The term "1993 Plan Year" shall
refer to the seven-month period beginning on June 1, 1993 (the effective date
of the Plan) and ending on December 31, 1993. The term "Plan Year" shall
refer to the 1993 Plan Year and to each subsequent calendar year beginning on
or after January 1, 1994.

1.21 REVENUE PROCEDURE 92-64. The term "Revenue Procedure 92-64"
refers to Internal Revenue Service Revenue Procedure 92-64, 1992-33 I.R.B. 11.

1.22 REVENUE PROCEDURE 92-65. The term "Revenue Procedure 92-65"
refers to Internal Revenue Service Revenue Procedure 92-65, 1992-33 I.R.B. 16.

1.23 SECTION 16(B) PARTICIPANT. The term "Section 16(b)
Participant" refers to a Participant who Southern Union designates to be an
officer subject to the provisions of Section 16(b) of the 1934 Act.

1.24 SOUTHERN UNION. The term "Southern Union" refers to Southern
Union Company, a corporation existing under the laws of the State of Delaware.

1.25 SOUTHERN UNION STOCK. The term "Southern Union Stock" refers
to shares of common stock of Southern Union.

1.26 TRUST. The term "Trust" refers to the Southern Union Company
Supplemental Executive Retirement Trust which may be established by Southern
Union to meet obligations under the Plan and which, if established, will
conform to the terms of the model

<PAGE>

trust described in Revenue Procedure 92-64. If established, the assets of the
Trust will be subject to the claims of Southern Union's creditors in the event
of Southern Union's insolvency as determined in the Trust.

1.27 YEAR OF VESTING SERVICE. A Participant shall receive credit
for a "Year of Vesting Service" for each full 12-month period during which he
is employed by Southern Union. A Participant's Years of Vesting Service shall
be determined based on the Participant's period of employment with Southern
Union without regard to the number of hours that the Participant completes
during his employment and without regard to whether the Participant's period
or periods of employment are contiguous. In calculating Years of Vesting
Service, a Participant shall receive credit for periods of employment prior to
the establishment of this Plan.

ARTICLE 2

PARTICIPATION

2.1 ELIGIBLE CLASS. Only those management employees of Southern
Union who are considered Highly Compensated Employees of Southern Union may be
selected to participate in the Plan under the provisions of Section 2.2.

2.2 SELECTION FROM ELIGIBLE CLASS. Eligibility of management
employees for participation in the Plan shall be determined by the Board of
Directors of Southern Union, in its sole discretion, on an individual basis.
The Board of Directors of Southern Union shall have the right to remove a
Participant from participation in the Plan at any time, in its sole
discretion, in which case the Participant shall not be eligible to have
additional Employee Salary Deferral Contributions, additional Employer
Matching Contributions or additional Employer Discretionary Contributions
credited to his Account. The Benefits Committee shall give written notice to
those management employees who have been selected by the Board of Directors of
Southern Union to participate in the Plan and to those Participants who have
been removed by the Board of Directors of Southern Union from participation in
the Plan.

ARTICLE 3

CONTRIBUTIONS

3.1 EMPLOYEE SALARY DEFERRAL CONTRIBUTIONS. For the 1993 Plan Year,
each Participant may elect, in his sole discretion and prior to June 25, 1993,
to defer up to ten percent of the

<PAGE>

Compensation payable to him with respect to each of his payroll checks beginning
with his July 15, 1993 payroll check (which is to cover the June 26, 1993
through July 7, 1993 payroll period) and ending with the final payroll check
that the Participant receives in 1993. For Plan Years subsequent to the 1993
Plan Year, each Participant may elect, in his sole discretion and in accordance
with the following sentence, to defer up to five percent of the Compensation (or
such other percentage of Compensation that may be determined, prior to the
beginning of the Plan Year, by the Board of Directors of Southern Union with
respect to such Plan Year) payable to him with respect to each of his payroll
checks beginning with the first payroll check in such Plan Year that does not
cover a payroll period that includes any period within the prior Plan Year and
ending with the final payroll check that the Participant receives in such Plan
Year. The election under the preceding sentence of each Section 16(b)
Participant must be made at least six months prior to the commencement of the
Plan Year for which the election is being made, and the election under the
preceding sentence of each Other Participant must be made prior to the
commencement of the Plan Year for which the election is being made. A
Participant may elect an Employee Salary Deferral Contribution under the
provisions of this Section 3.1 by giving written notice to Southern Union, which
notice (a) must be received by Southern Union within the time periods set forth
above in this Section 3.1, (b) must be in the form attached hereto as EXHIBIT A
(in the case of each Section 16(b) Participant) or EXHIBIT B (in the case of
each Other Participant) and otherwise in accordance with the Plan, and (c) must
set forth the Participant's irrevocable election as to the percentage of his
Compensation to be deferred in accordance with this Section 3.1. The percentage
of his Compensation that a Participant elects to defer under this Section 3.1
shall be deducted from each of his payroll checks described in the first two
sentences of this Section 3.1. A Participant's Employee Salary Deferral
Contributions under this Section 3.1 shall be credited to the Participant's
Account as soon as administratively feasible following the date that such
Employee Salary Deferral Contributions are deducted from the Participant's
payroll checks under this Section 3.1.

3.2 EMPLOYER MATCHING CONTRIBUTIONS. As soon as administratively
feasible following each date that Participant Employee Salary Deferral
Contributions are credited to the Participants' Accounts under Section 3.1,
Southern Union shall credit to the Account of each Participant who defers a
portion of his Compensation as an Employee Salary Deferral Contribution under
the provisions of Section 3.1, the following amounts: (a) for the 1993 Plan
Year, 50 percent of the first four percent of the Participant's Compensation, to
the extent that the Participant elects to defer such first four percent of
Compensation as an

6
<PAGE>

Employee Salary Deferral Contribution under the provisions of Section 3.1, with
respect to each of his payroll checks that he receives in 1993, beginning with
his July 15, 1993 payroll check, and (b) for Plan Years subsequent to the 1993
Plan Year, 50 percent (or such other percentage that may be determined, prior to
the beginning of the Plan Year, by the Board of Directors of Southern Union with
respect to such Plan Year) of the first two percent of the Participant's
Compensation (or such other percentage of the Participant's Compensation that
may be determined, prior to the beginning of the Plan Year, by the Board of
Directors of Southern Union with respect to such Plan Year), to the extent that
the Participant elects to defer such percentage as an Employee Salary Deferral
Contribution under the provisions of Section 3.1, with respect to each of his
payroll checks that he receives in such Plan Year, beginning with the first
payroll check in such Plan Year that does not cover a payroll period that
includes any period within the prior Plan Year. Southern Union's Employer
Matching Contributions with respect to the Participants' Employee Salary
Deferral Contributions shall be made in the form of Southern Union Stock.

3.3 EMPLOYER DISCRETIONARY CONTRIBUTIONS. From time to time, the
Board of Directors of Southern Union, in its sole and absolute discretion, may
elect to credit any dollar amount to a Participant's Account. The Board of
Directors of Southern Union may elect, under the provisions of this Section
3.3, to credit an Employer Discretionary Contribution to the Account of an
individual Participant without electing to credit Employer Discretionary
Contributions to the Accounts of other Plan Participants and/or may elect to
credit Employer Discretionary Contributions in different amounts (which may or
may not reflect the Participants' Compensation levels) to two or more
Participants. Southern Union's Employer Discretionary Contributions may be
made in the form of Southern Union Stock.

ARTICLE 4

PARTICIPANT ACCOUNTS

A separate Account shall be established and maintained for each
Participant and shall reflect the elected Employee Salary Deferral
Contributions that are credited to a Participant's Account under the
provisions of Section 3.1, the Employer Matching Contributions that are
credited to a Participant's Account under the provisions of Section 3.2, the
Employer Discretionary Contributions, if any, that are credited to a
Participant's Account under the provisions of Section 3.3 and all income,
gains and losses from time to time credited with respect to such amounts.

<PAGE>

ARTICLE 5

VESTING

5.1 VESTING SCHEDULE. Subject to the provisions of Article 8, a
Participant's Employee Salary Deferral Amount shall be 100 percent vested at
all times. Subject to the limitations set forth in Article 7 with respect to
Section 16(b) Participants and the provisions of Article 8 and Section 12.2, a
Participant's Non-Salary Deferral Amount shall vest, based on the
Participant's Years of Vesting Service as defined in Section 1.27, in
accordance with the following schedule:

YEARS OF VESTING SERVICE VESTED PERCENTAGE
------------------------ -----------------

<S> <C>
Less than 2 years 0%
2 years but not 3 years 20%
3 years but not 4 years 40%
4 years but not 5 years 60%
5 years but not 6 years 80%
6 or more years 100%
</TABLE>

The preceding sentence notwithstanding, subject to the limitations set forth
in Article 7 with respect to Section 16(b) Participants and the provisions of
Article 8 and Section 12.2, a Participant's Non-Salary Deferral Amount shall
become 100 percent vested upon the death of the Participant while the
Participant is employed by Southern Union.

5.2 FORFEITURES. That portion of a Participant's Account that is not
vested upon the Participant's termination of employment and that is forfeited
shall, at the discretion of Southern Union, be used to pay expenses relating to
the Plan and the Trust, if the Trust is established, and/or be allocated in the
Plan Year in which the forfeiture occurs (and, if necessary, in subsequent Plan
Years) in the same manner and amounts as Employer Matching Contributions are
allocated under Section 3.2 for such Plan Year or Years, thereby reducing
Southern Union's Employer Matching Contributions for the Plan Year or Years in
which so allocated.

ARTICLE 6

DISTRIBUTIONS

6.1 TERMINATION OF EMPLOYMENT. Except as provided in Article 7
with respect to Section 16(b) Participants and except in the case of an
earlier distribution required by Section 12.2, if a Participant terminates his
employment with Southern Union, the

<PAGE>

Participant, if he is living (or the Participant's Beneficiary if the
Participant is not living), shall receive a distribution of the vested portion
of the Participant's Account, as determined under Section 5.1, not later than
the later of (a) 30 days following the Participant's termination of employment
with Southern Union, or (b) July 1, 1994.

6.2 UNFORESEEABLE EMERGENCY. Subject to the limitations set forth
in Article 7 with respect to Section 16(b) Participants, in the case of a
proven unforeseeable emergency, as determined under this Section 6.2, and in
the discretion of the Benefits Committee in accordance with uniform principles
consistently applied, the Benefits Committee may permit a Participant to
withdraw a portion of his Account under the Plan. An unforeseeable emergency
justifying a withdrawal under this Section 6.2 must constitute an
unanticipated emergency that is caused by an event beyond the control of the
Participant and that would result in severe financial hardship to the
Participant if the early withdrawal were not permitted. An unforeseeable
emergency justifying a withdrawal under this Section 6.2 must constitute a
severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent (as
defined in Code Section 152(a)) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an unforeseeable
emergency will depend upon the facts of each case, but, in any case, a
withdrawal may not be made under this Section 6.2 to the extent that the
hardship is or may be relieved (a) by reimbursement or compensation by
insurance or otherwise, (b) by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship, or (c) by cessation of Employee Salary Deferral Contributions under
the Plan. Examples, without limitation, of circumstances that are not to be
considered unforeseeable emergencies under this Section 6.2 include the need to
send a Participant's child to college or the desire to purchase a home. An
unforeseeable emergency withdrawal under this Section 6.2 shall be limited to
the amount necessary to satisfy the emergency need, as determined in the
discretion of the Benefits Committee.

6.3 INVESTMENT INTENT. Except as provided in Section 6.2, a
Participant shall, contemporaneously with his receipt of a distribution of
Southern Union Stock hereunder, execute and deliver to Southern Union a
written statement, in form satisfactory to Southern Union, in which such
Participant represents and warrants that such Participant has acquired the
shares of Southern Union Stock distributed hereunder for such Participant's
own account, for investment only and not with a view to the resale or
distribution

<PAGE>

thereof, and agrees that any subsequent offer for sale or sale or
distribution of any of such shares of Southern Union Stock shall be made only
pursuant to either (a) a Registration Statement on an appropriate form under
the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard to the
shares of Southern Union Stock being offered or sold, or (b) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the holder shall, if so requested by Southern Union,
prior to any offer for sale or sale of such shares of Southern Union Stock,
obtain a prior favorable written opinion, in form and substance satisfactory
to Southern Union, from counsel for or approved by Southern Union, as to the
applicability of such exemption thereto. The foregoing restriction on shares
of Southern Union Stock distributed hereunder shall not apply to (i) issuances
by Southern Union so long as the shares of Southern Union Stock being issued
are registered under the Securities Act and a prospectus in respect thereof is
current or (ii) reofferings of shares of Southern Union Stock by affiliates of
Southern Union as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) if the shares of Southern Union Stock
being reoffered are registered under the Securities Act and a prospectus in
respect thereof is current.

6.4 ISSUANCE OF CERTIFICATES; LEGENDS. Southern Union may endorse
such legend or legends upon the certificates for shares of Southern Union
Stock distributed hereunder and may issue such "stop transfer" instructions to
its transfer agent in respect of such shares of Southern Union Stock as, in
its discretion, it determines to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements
of the Securities Act, or (ii) implement the provisions of the Plan and any
agreement between Southern Union and the holder of such shares of Southern
Union Stock.

ARTICLE 7

RESTRICTIONS APPLICABLE TO
SECTION 16(B) PARTICIPANTS

7.1 SHAREHOLDER APPROVAL. Approval of the Plan by the shareholders
of Southern Union shall be required only if Southern Union's securities
counsel determines prior to the 1994 Shareholders' Meeting that shareholder
approval of the Plan is required by Section 16(b) of the 1934 Act. Any other
provision of the Plan notwithstanding, in the event that Southern Union's
Securities counsel determines prior to the 1994 Shareholders' Meeting that
shareholder approval of the Plan is required by

<PAGE>

Section 16(b) of the 1934 Act and the shareholders of Southern Union do not
approve the Plan at the 1994 Shareholders' Meeting, (a) each Section 16(b)
Participant (or the Section 16(b) Participant's Beneficiary if the Section 16(b)
Participant is not living) shall forfeit all rights to his Non-Salary Deferral
Amount, (b) each Section 16(b) Participant (or the Section 16(b) Participant's
Beneficiary if the Section 16(b) Participant is not living) shall receive a
distribution of his Employee Salary Deferral Amount not later than the later of
30 days after the date of the 1994 Shareholders' Meeting or July 1, 1994, and
(c) there shall be no further Employee Salary Deferral Contributions, Employer
Matching Contributions or Employer Discretionary Contributions with respect to
any Section 16(b) Participant.

7.2 EMPLOYEE SALARY DEFERRAL CONTRIBUTIONS. Except in the case of
an earlier distribution required by Section 7.1, upon the occurrence of a
Distribution Event with respect to a Section 16(b) Participant, the Section
16(b) Participant (or the Section 16(b) Participant's Beneficiary if the
Section 16(b) Participant is not living) shall be entitled to receive from his
Employee Salary Deferral Amount such part or all of such Employee Salary
Deferral Amount as such Section 16(b) Participant would have been entitled to
receive (on account of such Distribution Event) if such Section 16(b)
Participant had been an Other Participant and at the same time at which any
Other Participant would be entitled to receive a distribution upon the
occurrence of such Distribution Event and under the same circumstances
pursuant to which any Other Participant would be entitled to receive a
distribution upon the occurrence of such Distribution Event. In addition,
special rules relating to Section 16(b) Participants' elections to make
Employee Salary Deferral Contributions to the Plan are set forth in Section
3.1.

7.3 OTHER CONTRIBUTIONS. If, upon the occurrence of a Distribution
Event with respect to a Section 16(b) Participant, Southern Union's securities
counsel has determined that approval of the Plan by the shareholders of
Southern Union is not required by Section 16(b) of the 1934 Act, the Section
16(b) Participant (or the Section 16(b) Participant's Beneficiary if the
Section 16(b) Participant is not living) shall be entitled to receive from his
Non-Salary Deferral Amount such part or all of such vested Non-Salary Deferral
Amount (as determined under Section 5.1) as such Section 16(b) Participant
would have been entitled to receive (on account of such Distribution Event) if
such Section 16(b) Participant had been an Other Participant and at the same
time at which any Other Participant would be entitled to receive a
distribution upon the occurrence of such Distribution Event and under the same
circumstances pursuant to which any Other Participant would be entitled to
receive a distribution upon the

<PAGE>

occurrence of such Distribution Event. Any other provision of the Plan
notwithstanding and unless a forfeiture occurs under the provisions of Section
7.1, if, upon the occurrence of a Distribution Event with respect to a Section
16(b) Participant, Southern Union's securities counsel has determined that
approval of the Plan by the shareholders of Southern Union is required by
Section 16(b) of the 1934 Act or has not made a determination as to whether such
shareholder approval of the Plan is required, (a) the Section 16(b) Participant
(or the Section 16(b) Participant's Beneficiary if the Section 16(b) Participant
is not living) shall be entitled to receive the Section 16(b) Participant's
Non-Salary Deferral Amount not later than the latest of (i) 30 days after the
date of the 1994 Shareholders' Meeting, (ii) 30 days after termination of the
Section 16(b) Participant's employment with Southern Union, or (iii) July 1,
1994 in the case of a Distribution Event constituting a termination of
employment with Southern Union under Section 6.1, (b) the Section 16(b)
Participant's Non-Salary Deferral Amount shall not be subject to withdrawal
under the provisions of Section 6.2 until after the 1994 Shareholders' Meeting
in the case of a Distribution Event constituting a determination by the Benefits
Committee that the Participant has experienced an unforeseeable emergency under
Section 6.2, and (c) the Section 16(b) Participant (or the Section 16(b)
Participant's Beneficiary if the Section 16(b) Participant is not living) shall
be entitled to receive his Non-Salary Deferral Amount not later than 30 days
after the later of the 1994 Shareholders' Meeting and the termination of the
Plan in the case of a Distribution Event constituting Southern Union's
termination of the Plan under Section 12.2.

7.4 VESTING. If a Section 16(b) Participant dies after Southern
Union's securities counsel has determined that approval of the Plan by the
shareholders of Southern Union is not required by Section 16(b) of the 1934
Act, the Section 16(b) Participant shall become 100 percent vested in his
Non-Salary Deferral Amount upon his death. Any other provision of the Plan
notwithstanding and unless a forfeiture occurs under the provisions of Section
7.1, if a Section 16(b) Participant dies after Southern Union's securities
counsel has determined that approval of the Plan by the shareholders of
Southern Union is required by Section 16(b) of the 1934 Act or at a time when
Southern Union's securities counsel has not made a determination as to whether
such approval of the Plan is required, the Section 16(b) Participant shall
become 100 percent vested in his Non-Salary Deferral Amount immediately
following the date of the 1994 Shareholders' Meeting.

<PAGE>

ARTICLE 8

PARTICIPANTS' RIGHTS

Nothing contained in this Plan shall be construed as giving any employee
of Southern Union or any Participant the right to be retained in Southern
Union's service or employ or shall be construed to interfere with the right of
Southern Union to discharge any employee of Southern Union or any Participant
at any time regardless of the effect that such discharge would have upon him
as a Participant in the Plan. Nothing contained herein shall be construed to
interfere with Southern Union's right to discharge any employee at will for
any reason or for no reason at all. Nothing contained in this Plan shall be
construed as giving any employee of Southern Union or any Participant the
right to receive any benefit not specifically provided by the Plan. Any other
provision of the Plan notwithstanding, a Participant shall not have any
interest in the amounts credited to his Account until such Account is
distributed in accordance with the provisions of Article 6, Article 7 or
Section 12.2. All Employee Salary Deferral Contributions, all Employer
Matching Contributions, all Employer Discretionary Contributions and all
earnings, gains and losses with respect to such Employee Salary Deferral
Contributions, Employer Matching Contributions and Employer Discretionary
Contributions shall remain subject to the claims of Southern Union's general
creditors in accordance with the provisions of the Plan and, if the Trust is
established, in accordance with the terms of the Trust. With respect to
amounts credited to a Participant's Account, the rights of the Participant,
the Beneficiary of the Participant or any other person claiming through the
Participant under this Plan shall be solely those of unsecured general
creditors of Southern Union; and the obligations of Southern Union hereunder
shall be purely contractual. To the extent that benefits under the Plan are not
paid from the Trust, if it is established, such benefits shall be paid from the
general assets of Southern Union. As contemplated by Revenue Procedure 92-65,
Participants shall have the status of general unsecured creditors of Southern
Union and the Plan shall constitute a mere promise of Southern Union to make
benefit payments in the future.

ARTICLE 9

ANTIALIENATION

<PAGE>

in any manner to alienation or anticipation. No Participant may borrow against
his Account. No Account shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution or levy of any kind, whether voluntary or involuntary,
including but not limited to any liability which is for alimony or other
payments for the support of a spouse or former spouse, or for any other relative
of a Participant. Neither a Participant's Account hereunder nor a Participant's
rights to benefits hereunder may be assigned to any other party by means of a
judgment, decree or order (including approval of a property settlement
agreement) relating to the provision of child support, alimony payments, or
marital property rights of a spouse, former spouse, child or other dependent of
the Participant. As contemplated by Revenue Procedure 92-65, a Participant's
rights to benefit payments under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant or the Participant's
Beneficiary.

ARTICLE 10

UNFUNDED STATUS

Any and all payments made to a Participant pursuant to the Plan shall be
made from the assets of the Trust, if the Trust is established. If the Trust
is not established, or to the extent that the assets of the Trust are
insufficient to make such payments, such payments shall be made from the
general assets of Southern Union. Any payments made in good faith under the
terms of the Plan to a Participant, his Beneficiary or to any other party
under the provisions of Section 14.3 shall fully discharge the Plan, the Trust
and the Trustee of the Trust (if the Trust is established), Southern Union and
the Benefits Committee from all further obligations with respect to such
payments. Southern Union intends that the Plan and the Trust (if it is
established) shall be considered unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974.

ARTICLE 11

PLAN ADMINISTRATION

11.1 POWERS AND DUTIES. The Benefits Committee shall administer the
Plan and shall keep records of individual Accounts. It shall have the
authority to interpret, construe and implement the Plan, to adopt and review
rules and regulations relating to the

<PAGE>

Plan and to make all other determinations relating to the administration of the
Plan. Any decision or interpretation of any provision of the Plan adopted by
the Benefits Committee shall be final and conclusive. A Participant who is also
a member of the Benefits Committee shall not participate in any decision
involving any requests made by him or relating in any way solely to his rights,
duties and obligations as a Participant under the Plan.

11.2 CONSULTANTS. The Benefits Committee may employ such counsel,
accountants, actuaries and other agents as it shall deem advisable. Southern
Union shall pay the compensation of such counsel, accountants, actuaries and
other agents and any other expenses incurred by the Benefits Committee in the
administration of the Plan to the extent that such compensation and expenses
are not paid from forfeitures under the provisions of Section 5.2.

ARTICLE 12

AMENDMENT AND TERMINATION

12.1 AMENDMENT. Southern Union reserves the right to amend or to
modify the Plan at any time by formal action of its Board of Directors,
including the right to amend or to modify the Plan retroactively, as long as
the amendment or modification does not adversely affect a Participant's rights
with respect to vested amounts then credited to his Account, which rights are
subject to the provisions of the Plan, including the provisions of Article 6,
Article 7, Article 8 and Section 12.2.

12.2 TERMINATION. Southern Union reserves the right to terminate
the Plan at any time by formal action of its Board of Directors. Subject to the
limitations set forth in Article 7 with respect to Section 16(b) Participants,
notwithstanding Article 5 of the Plan, upon termination of the Plan, each
Participant shall become 100 percent vested in his Account and distributions of
the Participants' Accounts shall be made not later than 30 days after the
termination of the Plan.

ARTICLE 13

CLAIMS PROCEDURE

13.1 CLAIMS. A Participant or any designated Beneficiary of a
deceased Participant may make a claim for benefits by filing a written claim
for such benefits with the Benefits Committee, in a form that may be
prescribed by the Benefits Committee, which shall set forth: (a) the name,
address and Social Security number of the

<PAGE>

Participant, (b) the period of time the Participant was employed with Southern
Union, and (c) such other information as the Benefits Committee may require.

13.2 NOTICE OF DECISION. If a claim is wholly or partially denied,
notice of the decision, in accordance with Section 13.3, shall be furnished to
the claimant within a reasonable period of time, not to exceed 90 days after
the Benefits Committee's receipt of the claim, unless special circumstances
require an extension of time for processing the claim. If such an extension
of time is required, written notice of the extension shall be furnished to the
claimant prior to the termination of the initial 90-day period. In no event
shall such extension exceed a period of 90 days from the end of such initial
period. The extension notice shall indicate the special circumstances
requiring an extension of time and the date on which the Benefits Committee
expects to render a decision. If neither notice of denial of claim nor notice
of extension of time is furnished, then such claim shall be deemed denied and
the claimant may proceed with the review procedure specified in Sections 13.4
and 13.5.

13.3 CONTENT OF NOTICE. The Benefits Committee shall provide every
claimant who is denied a claim for benefits written notice setting forth, in a
manner calculated to be understood by the claimant, the following: (a) the
specific reason or reasons for the denial; (b) specific reference to pertinent
Plan provisions upon which the denial is based; (c) a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary; and
(d) an explanation of the Plan's claims review procedure, as set forth in
Sections 13.4 and 13.5 below.

13.4 APPEAL PROCEDURE. The purpose of the review procedure set
forth in this Section 13.4 and in Section 13.5 is to provide a procedure by
which a claimant, under the Plan, may have a reasonable opportunity to appeal
denial of a claim to the Appeals Committee for a full and fair review. To
accomplish that purpose, the claimant (or his duly authorized representative)
may: (a) request review upon written application to the Appeals Committee; (b)
review pertinent Plan documents; and (c) submit issues and comments in
writing. A claimant (or his duly authorized representative) shall request a
review by filing a written application for review with the Appeals Committee
within 60 days after the claimant receives written notice of the denial of his
claim.

<PAGE>

13.5 REVIEW PROCEDURE. Decision on review of a denied claim shall
be made in the following manner: (a) the decision on review shall be made by
the Appeals Committee, which may, in its discretion, hold a hearing on the
denied claim; (b) the Appeals Committee shall make its decision promptly, and
not later than 60 days after the Appeals Committee receives the request for
review, unless special circumstances require extension of time, in which case
a decision shall be rendered as soon as possible, but not later than 120 days
after receipt of the request for review; (c) if such an extension of time for
review is required, written notice of the extension shall be furnished to the
claimant prior to the commencement of the extension; (d) the decision on
review shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision is
based; and (e) the decision shall be furnished to the claimant within the
period set forth in Section 13.5(b), but if the decision is not furnished
within the period set forth in Section 13.5(b), the claim shall be deemed
denied on review.

13.6 DISPUTES. If a dispute arises with respect to any matter under
this Plan, the Benefits Committee may refrain from taking any other or further
action in connection with the matter involved in the controversy until the
dispute has been resolved.

13.7 APPEALS COMMITTEE. For purposes of this Article 13, the
Appeals Committee shall consist of a committee of at least three but not more
than five individuals appointed by the Board of Directors of Southern Union.

ARTICLE 14

GENERAL PROVISIONS

14.1 GOVERNING LAW. Except to the extent superseded by federal law,
the laws of the State of Texas shall be controlling in all matters relating to
the Plan, including the construction and performance hereof, notwithstanding
principles of conflicts of laws.

14.2 CAPTIONS. The captions of Articles and Sections of this Plan
are for convenience of reference only and shall not control or affect the
meaning or construction of any of its provisions.

14.3 FACILITY OF PAYMENT. Any amounts payable hereunder to any
person who is under legal disability or who, in the judgment of the Benefits
Committee, is unable to manage his financial affairs properly may be paid to
the legal representative of such person or

<PAGE>

may be applied for the benefit of such person in any manner that the Benefits
Committee may select, and any such payment shall be deemed to be payment for
such person's account.

14.4 WITHHOLDING. To the extent required by the laws in effect at
the time compensation or deferred compensation payments are made hereunder,
Southern Union shall withhold from such compensation, or from such deferred
compensation payments, any taxes required to be withheld for federal, state or
local government purposes.

14.5 ADMINISTRATIVE EXPENSES. Except as provided in the Trust, if
the Trust is established, all expenses relating to the Plan and its
administration shall, at the discretion of Southern Union, be paid from
forfeitures under the provisions of Section 5.2 or shall be borne by Southern
Union.

14.6 SEVERABILITY. Any provision of this Plan prohibited by the law
of any jurisdiction, shall, as to such jurisdiction, be ineffective to the
extent of such prohibition without invalidating the remaining provisions
hereof.

14.7 LIABILITY. Except as otherwise expressly provided herein, no
member of the Board of Directors of Southern Union, no member of the Benefits
Committee, and no officer, employee or agent of Southern Union or the Benefits
Committee (specifically including but not limited to an employee of Southern
Union acting at the direction of the Benefits Committee) shall have any
liability to any person, firm or corporation based on or arising out of the
Plan except in the case of gross negligence or fraud. Southern Union agrees
to indemnify each member of its Board of Directors and each member of its
Benefits Committee against all liabilities arising out of the performance of his
duties hereunder, excluding liabilities resulting from the member's gross
negligence or fraud.

14.8 BINDING EFFECT. This Plan shall be binding upon and shall
inure to the benefit of Southern Union, its successors and assigns and each
Participant and his heirs, executors, administrators and legal
representatives.

14.9 CONSTRUCTION. Any words herein used in the masculine shall be
read and construed in the feminine where they would so apply. Words in the
singular shall be read and construed as though used in the plural in all cases
where they would so apply.

<PAGE>

EXECUTED this _____ day of _______________, 1993.

SOUTHERN UNION COMPANY

By:________________________________
Title:_____________________________

19
<PAGE>
EXHIBIT A
(ELECTION FORM TO BE USED IN THE CASE OF PARTICIPANTS DESIGNATED BY
SOUTHERN UNION COMPANY TO BE OFFICERS SUBJECT TO THE PROVISIONS OF
SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934 IF STOCKHOLDER
APPROVAL IS REQUIRED BY SECTION 7.1 OF THE SOUTHERN UNION COMPANY
SUPPLEMENTAL DEFERRED COMPENSATION PLAN)

ELECTION FORM

SOUTHERN UNION COMPANY SUPPLEMENTAL DEFERRED COMPENSATION PLAN
(the "Deferred Compensation Plan")

( ) I irrevocably elect to defer under the Deferred Compensation Plan ______
percent (not to exceed five percent) of the "gross compensation" (including
bonuses, but excluding severance payments) that I may be entitled to
receive from Southern Union Company ("Southern Union") in connection with
each of my 199__ payroll checks, beginning with my January ___, 199__
payroll check. I understand that my gross compensation, for purposes of
determining the amount to be deferred under the Deferred Compensation Plan
pursuant to this election, will be determined before any deductions for any
salary deferral elections that I may have made (or may make) under the
Southern Union Savings Plan and/or the Southern Union Company Employee
Flexible Benefit Plan.

( ) I do not elect to defer compensation under the Deferred Compensation Plan
in 199__.

Subject to the provisions of the second paragraph following this paragraph, I
understand that Southern Union will match 50 percent of the first two percent of
each of my payroll checks that I elect to defer under the above salary deferral
election and that, in general, Southern Union's matching contributions will not
vest until the Deferred Compensation Plan is approved by the stockholders of
Southern Union and until I have completed six years of service with Southern
Union.

Subject to the provisions of the following paragraph, I understand that the
value of my account under the Deferred Compensation Plan, which will reflect
contributions under the above salary deferral election as well as matching
contributions, will increase if the assets set aside to distribute benefits
under the Deferred Compensation Plan when they become due appreciate in value
and earn income and will decrease if such assets depreciate in value and
experience losses.

I understand that the funds set aside under the Deferred Compensation Plan will
be subject to the claims of Southern Union's general creditors and that I will
be considered an unsecured creditor with respect to my benefits under the
Deferred Compensation Plan.

I also understand that the Deferred Compensation Plan does not provide for loans
and that, unless the Deferred Compensation Plan is terminated, generally, I will
not have access to the salary deferrals that I elect to make under the Deferred
Compensation Plan until the later of July 1, 1994 or 30 days following the date
on which my employment with Southern Union terminates and that, unless the
Deferred Compensation Plan is terminated, generally, I will have access to
Southern Union's vested matching contributions that are set aside for me under
the Deferred Compensation Plan at the same time that I have access to my
deferrals under the Deferred Compensation Plan, except that matching
contributions will not be available until the stockholders of Southern Union
approve the Deferred Compensation Plan (if such approval is required by Section
7.1 of the Deferred Compensation Plan).

<PAGE>

Further, I understand that until the Deferred Compensation Plan is approved by
the stockholders of Southern Union (if such approval is required by Section 7.1
of the Deferred Compensation Plan), all purchases of Southern Union common stock
that are credited to my participant account under the terms of the Deferred
Compensation Plan will be subject to the short-swing profit provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, and that if
stockholder approval is required by Section 7.1 of the Deferred Compensation
Plan, I may not directly or indirectly sell or dispose of ANY shares of Southern
Union common stock which I may be considered to beneficially own for securities
law purposes, however acquired, until at least six months after the earlier of
(i) the date that the Deferred Compensation Plan is approved by Southern Union's
stockholders or (ii) the date that I am no longer deferring compensation under
the Deferred Compensation Plan.

Finally, I understand that my rights to benefits under the Deferred Compensation
Plan will be subject to the terms of the Deferred Compensation Plan.

EXECUTED this ____ day of ___________________, 199__.

__________________________________________
Participant
Print Name:______________________________
<PAGE>

EXHIBIT B
(ELECTION FORM TO BE USED IN THE CASE OF PARTICIPANTS NOT DESIGNATED BY
SOUTHERN UNION COMPANY TO BE OFFICERS SUBJECT TO THE PROVISIONS OF
SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934)

ELECTION FORM

SOUTHERN UNION COMPANY SUPPLEMENTAL DEFERRED COMPENSATION PLAN
(the "Deferred Compensation Plan")

( ) I do not elect to defer compensation under the Deferred Compensation Plan
in 199__.

Subject to the provisions of the following paragraph, I understand that the
value of my account under the Deferred Compensation Plan, which will reflect
contributions under the above salary deferral election as well as matching
contributions, will increase if the assets set aside to distribute benefits
under the Deferred Compensation Plan when they become due appreciate in value
and earn income and will decrease if such assets depreciate in value and
experience losses.

Finally, I understand that my rights to benefits under the Deferred Compensation
Plan will be subject to the terms of the Deferred Compensation Plan.

EXECUTED this ____ day of ___________________, 199__.

__________________________________________
Participant
Print Name:_______________________________
<PAGE>

PROXY SOUTHERN UNION COMPANY PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OR
SOUTHERN UNION COMPANY FOR THE MAY __, 1994 ANNUAL MEETING OF STOCKHOLDERS

The undersigned hereby appoints, GEORGE L. LINDEMANN, JOHN E. BRENNAN and
PETER H. KELLEY, or any one, two or all three of them, with power of
substitution in each, proxies for the undersigned, to represent the undersigned
and to vote all the Common Stock of the Company which the undersigned would be
entitled to vote, as fully as the undersigned could vote and act if personally
present, at the Annual Meeting of Stockholders to be held on May __, 1994 at
__pm Central Daylight Savings Time, in the Auditorium on the 3rd Floor Board
Room of the Texas Commerce Bank Building, 700 Lavaca Street, Austin, Texas or at
any adjournment thereof.

The Proxies are authorized to vote in their discretion upon all matters
properly brought before the meeting, including any matter of which Management
was not aware a reasonable time before the solicitation of this proxy.

1. Election of the following nominees as Class I Directors:
JOHN E. BRENNAN, FRANK W. DENIUS and ROGER J. PEARSON

For All Nominees Withheld for All Nominees
/ / / /

WITHHELD FOR THE FOLLOWING ONLY (WRITE THE NAME OF THE NOMINEE(S) ON
THE SPACE BELOW)

-----------------------------------------------------------------

2. Proposal to increase the maximum size of the Board of Directors to
thirteen Directors.

For Against Abstain

/ / / / / /

3. Proposal to amend the Restated Certificate of Incorporation and Bylaws
of the Company to eliminate Article Twelfth and other 80%
supermajority voting provisions contained therein.

For Against Abstain

/ / / / / /

4. Proposal to adopt the Southern Union Supplemental Deferred
Compensation Plan.

For Against Abstain

/ / / / / /

<PAGE>

5. Proposal to adopt the Southern Union Directors' Deferred Compensation
Plan.

For Against Abstain

/ / / / / /

The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" all Nominees and FOR proposals 2, 3, 4 and 5.

Date: , 1994
---------------

---------------------------
Signature

Please mark, date and sign as your
name(s) appear(s) to the left and
return in the enclosed envelope. If
acting as an executor,
administrator, trustee, guardian,
etc., you should so indicate when
signing. If the signer is a
corporation, please sign the full
corporate name, by duly authorized
officer. If shares are held
jointly, each shareholder named
should sign.

13746.1